The Ministry of Finance (MoF) on January 29, 2026, notified regarding the India’s Economic Survey 2025–26: Growth, Stability and Reform.
India’s Economic Survey 2025–26, presented in Parliament by Union Finance Minister Smt. Nirmala Sitharaman, projects GDP growth at 7.4 percent, reaffirming India’s position as the fastest-growing major economy for the fourth consecutive year. Looking ahead, the Survey estimates real GDP growth for FY27 in the range of 6.8–7.2 percent, with India’s medium-term potential growth assessed at around 7 percent, indicating sustained economic momentum despite global uncertainties.
The Survey highlights that domestic demand remained the primary driver of growth in FY26, led by strong private consumption and investment. Private final consumption expenditure rose to 61.5 percent of GDP, the highest level since FY2012, reflecting low inflation, stable employment, tax rationalization, and rising real incomes. Rural consumption was supported by strong agricultural performance, while urban consumption improved due to tax reforms, indicating a broad-based recovery in demand.
Investment activity also remained robust, with gross fixed capital formation (GFCF) projected at 30 percent of GDP. Investment growth strengthened in the first half of FY26, expanding by 7.6 percent, exceeding both last year’s pace and the pre-pandemic average. Sustained public capital expenditure and improving private investment intentions supported this momentum.
On the sectoral front, agriculture and allied activities are projected to grow by 3.1 percent in FY26, aided by a favorable monsoon. While crop output showed some variability, allied sectors such as livestock and fisheries grew steadily at 5–6 percent, helping stabilize overall agricultural growth.
The industrial sector showed clear signs of strengthening. Manufacturing grew by 8.4 percent in the first half of FY26, while construction activity remained buoyant due to infrastructure spending. The industrial sector is expected to grow by 6.2 percent in FY26, supported by strong demand, GST rationalization, and positive high-frequency indicators such as PMI, IIP, steel consumption, and cement production.
On the supply side, the services sector continued to be the main engine of growth. Services GVA expanded by 9.3 percent in the first half of FY26, reflecting broad-based growth across most sub-sectors. Except for trade, hospitality, and transport—which were severely affected during the pandemic—all services sub-sectors recorded growth of around 9 percent.
The Survey notes a significant moderation in inflation, which enhanced real purchasing power and supported consumption. Headline CPI inflation declined sharply to 1.7 percent, mainly due to falling food prices, particularly vegetables and pulses. Core inflation remained largely stable, and the overall inflation outlook is expected to remain benign, supported by favorable supply conditions and GST rate rationalization.
A prudent fiscal policy supported growth during FY26, marked by strong revenue collections and controlled expenditure. Direct and indirect tax collections remained robust, with record GST revenues. Capital expenditure grew strongly, while revenue expenditure was moderated, improving the quality of public spending. Financial markets responded positively, reflected in lower sovereign bond yields and improved investor confidence.
India’s monetary and financial conditions remained supportive. The Reserve Bank implemented a cumulative 125 basis points cut in the repo rate, along with liquidity-enhancing measures. These actions improved credit transmission, reduced lending rates, and strengthened the banking sector, with NPAs falling to a multi-decade low of 2.2 percent and bank profitability improving.
The external sector remained resilient despite global trade uncertainty. India’s total exports reached a record $825.3 billion in FY25, with continued momentum in FY26. Services exports and remittances offset the merchandise trade deficit, keeping the current account deficit moderate at 0.8 percent of GDP. Foreign exchange reserves remained comfortable, covering 11 months of imports.
The Survey highlights progress in trade and structural reforms, including new trade agreements with the UK, Oman, New Zealand, and the European Union, along with ongoing negotiations with the US. A major reform was the notification of the four Labor Codes, aimed at simplifying compliance, enhancing labor flexibility, and expanding social security coverage.
Finally, the Survey acknowledges ongoing global risks, including geopolitical tensions, trade frictions, and subdued global growth. However, India’s economy remains resilient due to strong domestic demand, healthy balance sheets, low inflation, and sustained public investment. With cumulative reforms improving the growth outlook, the Survey projects FY27 GDP growth at 6.8–7.2 percent, emphasizing cautious optimism rather than pessimism.
[Release ID: 2219976]
