India’s economy continues to demonstrate resilience and structural strength even as the global environment remains fragile, according to the Economic Survey 2025–26 tabled in Parliament on Wednesday by Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman. The Survey paints a picture of an economy that has consolidated macroeconomic stability, strengthened its growth fundamentals, and laid the groundwork for long-term strategic resilience in an era of geopolitical volatility and trade fragmentation.

Fastest-Growing Major Economy for the Fourth Consecutive Year

Against a backdrop of subdued global growth, elevated financial vulnerabilities, and persistent geopolitical tensions, India has once again emerged as the world’s fastest-growing major economy. The First Advance Estimates project real GDP growth at 7.4 per cent and Gross Value Added (GVA) growth at 7.3 per cent in FY26, reaffirming India’s strong post-pandemic recovery and structural momentum.

The Survey estimates India’s potential growth at around 7 per cent, while real GDP growth for FY27 is projected in the range of 6.8–7.2 per cent, signalling sustained medium-term expansion driven by consumption, investment, and productivity-enhancing reforms.

Consumption and Investment Drive Broad-Based Demand

Private Final Consumption Expenditure (PFCE) grew by 7.0 per cent in FY26, reaching 61.5 per cent of GDP, the highest share since 2012. This reflects a steady improvement in household purchasing power, supported by low inflation, stable employment conditions, and rising real incomes.

The Survey notes that rural consumption has been bolstered by strong agricultural performance, while urban consumption has improved on the back of tax rationalisation and higher discretionary spending, resulting in broad-based demand momentum across regions and income groups.

Investment activity also gained traction. Gross Fixed Capital Formation (GFCF) expanded by 7.8 per cent in FY26, with its share remaining steady at around 30 per cent of GDP. This was underpinned by sustained public capital expenditure and a revival in private investment, reflected in higher corporate announcements and capacity expansion plans.

Services Lead Growth; Manufacturing Shows Structural Recovery

On the supply side, the services sector remained the primary engine of growth, with GVA expanding by 9.3 per cent in the first half of FY26 and an estimated 9.1 per cent growth for the full year. The rising contribution of modern, tradable, and digitally delivered services underscores India’s growing integration with global value chains.

Industry also showed renewed strength. Industrial GVA grew by 7.0 per cent in real terms in the first half of FY26, despite persistent global headwinds. Manufacturing recorded a notable acceleration, with GVA growth of 7.72 per cent in Q1 and 9.13 per cent in Q2 of FY26, signalling a structural recovery supported by policy reforms and incentive-driven investments.

Fiscal Prudence Anchors Macroeconomic Stability

The Survey highlights the Centre’s commitment to credible fiscal consolidation, which has strengthened investor confidence and reinforced India’s macroeconomic framework. This prudence was reflected in three sovereign credit rating upgrades in 2025 by international rating agencies.

Centre’s revenue receipts increased to 9.2 per cent of GDP in FY25 (Provisional Actuals), up from a pre-pandemic average of about 8.5 per cent. This improvement was driven primarily by buoyant non-corporate tax collections and a steady expansion of the direct tax base. The number of income tax returns filed rose from 6.9 crore in FY22 to 9.2 crore in FY25, reflecting improved compliance, technology-driven administration, and rising incomes.

Gross GST collections during April–December 2025 stood at ₹17.4 lakh crore, registering a 6.7 per cent year-on-year growth, broadly aligned with nominal GDP trends. High-frequency indicators such as e-way bills also pointed to robust transaction volumes.

Public investment remained a key growth lever. Effective capital expenditure of the Central government rose to around 4 per cent of GDP in FY25, compared to a pre-pandemic average of 2.7 per cent. States were incentivised through the Special Assistance to States for Capital Expenditure (SASCI) to maintain capital spending at around 2.4 per cent of GDP.

Despite higher spending, India reduced its general government debt-to-GDP ratio by about 7.1 percentage points since 2020, even while sustaining elevated public investment levels.

Stronger Banks, Deeper Financial Inclusion

India’s monetary and financial sectors delivered a robust performance during FY26 (April–December 2025), supported by improved regulatory quality and balance-sheet strength.

The banking sector’s asset quality improved sharply, with the Gross Non-Performing Asset (GNPA) ratio declining to a multi-decadal low of 2.2 per cent in September 2025, while net NPAs fell to a record low of 0.5 per cent. Credit growth accelerated, with outstanding bank credit expanding by 14.5 per cent year-on-year as of December 2025.

Financial inclusion continued to deepen. Under the Pradhan Mantri Jan Dhan Yojana (PMJDY), 55.02 crore bank accounts had been opened as of March 2025, including 36.63 crore in rural and semi-urban areas, creating a strong foundation for direct benefit transfers and digital payments.

Schemes such as Stand-Up India, PM SVANidhi, and Pradhan Mantri Mudra Yojana (PMMY) expanded access to credit for entrepreneurs, street vendors, and micro-enterprises. PMMY alone had disbursed over ₹36.18 lakh crore across 55.45 crore loan accounts by October 2025.

Capital markets also saw wider participation. The number of unique investors crossed 12 crore in September 2025, with nearly 25 per cent being women, while total demat accounts exceeded 21.6 crore. The mutual fund industry expanded to 5.9 crore unique investors, with a growing share from non-metro cities.

External Sector Resilience and Export Momentum

India’s external sector remained resilient amid global trade uncertainties. Between 2005 and 2024, India’s share of global merchandise exports nearly doubled from 1 per cent to 1.8 per cent, while its share in global services exports more than doubled to 4.3 per cent.

Total exports touched a record USD 825.3 billion in FY25, led by robust services exports, which reached an all-time high of USD 387.6 billion, growing 13.6 per cent year-on-year. India retained its position as the world’s largest recipient of remittances, with inflows of USD 135.4 billion in FY25, providing critical support to the current account.

Foreign exchange reserves rose to USD 701.4 billion as of January 16, 2026, providing import cover of about 11 months and covering over 94 per cent of external debt.

Inflation at Historic Lows

India recorded its lowest inflation rate since the inception of the CPI series, with average headline inflation at 1.7 per cent during April–December 2025. The moderation was driven by a broad-based decline in food and fuel prices, which together account for over half of the CPI basket.

Among major emerging economies, India recorded one of the sharpest declines in inflation during 2025, reinforcing macroeconomic stability and supporting consumption growth.

Agriculture, Industry and Infrastructure Push Growth

Agriculture benefited from a good monsoon, with foodgrain production estimated at 3,577.3 lakh metric tonnes in AY 2024–25, marking a significant year-on-year increase. Horticulture continued to emerge as a major growth driver, accounting for about one-third of agricultural GVA.

The Production Linked Incentive (PLI) schemes across 14 sectors attracted over ₹2 lakh crore of actual investment, generating incremental production exceeding ₹18.7 lakh crore and creating over 12.6 lakh jobs by September 2025. The India Semiconductor Mission advanced domestic capabilities with projects involving investments of about ₹1.60 lakh crore.

Public investment in infrastructure reached new highs. National highways expanded nearly ten-fold in high-speed corridors since 2014, rail electrification touched 99 per cent, and India emerged as the world’s third-largest domestic aviation market. Power sector reforms delivered a historic turnaround, with DISCOMs recording a positive profit after tax of ₹2,701 crore in FY25 for the first time.

Social Progress, Education, Health and Employment

The Survey underscores steady gains in education and health. Gross Enrolment Ratios stood at 90.9 per cent at the primary level, 90.3 per cent at upper primary, and 78.7 per cent at secondary levels. India now hosts 23 IITs, 21 IIMs and 20 AIIMS, alongside international IIT campuses in Zanzibar and Abu Dhabi.

Health outcomes improved significantly, with India recording sharp declines in maternal, infant, and child mortality since 1990, outperforming global averages.

Employment generation remained steady, with 56.2 crore people employed in Q2 FY26, while the e-Shram portal registered over 31 crore unorganised workers, more than half of them women.

From Swadeshi to Strategic Indispensability

Looking ahead, the Economic Survey proposes a disciplined ‘Swadeshi’ strategy focused on strategic resilience rather than blanket import substitution. The three-tiered framework prioritises critical vulnerabilities, economically viable capabilities, and global integration, with the aim of progressing from self-reliance to strategic indispensability.

As the Survey notes, India’s objective is not merely to substitute imports, but to embed itself so deeply in global systems that the world moves from “thinking about buying Indian” to “buying Indian without thinking.”

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