Highlight of Economic Survey 2025–26

After Reading This Article You Can Solve This UPSC Mains Model Questions:

“With reference to the Economic Survey 2025–26, analyse how sectoral rebalancing and services-led expansion have contributed to India’s macroeconomic stability and employment generation in recent years.” 250 words (GS-3, Economy)

Context

• The Economic Survey 2025-26, presented ahead of the Union Budget, assesses India’s macroeconomic performance, structural transformation, and medium-term growth prospects.
• It reflects India’s transition from post-pandemic recovery to sustained, resilient, and inclusive growth, even amid global uncertainties.
• Emphasises policy coordination between fiscal, monetary, and structural reforms to strengthen economic foundations.

Key Takeaways

• Real GDP growth for FY27 projected at 6.8–7.2%.
• Inflation at historic low: Average CPI inflation 1.7% (Apr–Dec 2025).
• Broad-based growth across agriculture, industry, and services.
• Exports at record highs:
  • USD 825.3 billion (FY25)
  • USD 418.5 billion (H1 FY26)
• Improved fiscal credibility with sovereign rating upgrades.
• Accommodative monetary stance: Repo rate at 5.25% (Dec 2025).

Crux of the Economic Survey 2025–26

1. State of the Economy: Growth Outlook

1.1 GDP & Demand Conditions

• As per First Advance Estimates:
  • Real GDP growth (FY26): 7.4%
  • GVA growth (FY26): 7.3%
• Drivers of demand:
  • Strong agricultural output → higher rural incomes.
  • Urban consumption is boosted by tax rationalisation.
• India’s potential growth estimated at ~7%, indicating strong medium-term capacity.

2. Inflation Trends & Outlook

• Lowest inflation since CPI series began:
  • Headline CPI (Apr–Dec 2025): 1.7%
• India recorded one of the sharpest inflation declines among EMDEs (-1.8 percentage points in 2025 over 2024).
• Reserve Bank of India action:
  • FY26 inflation forecast revised down from 2.6% to 2.0%.
• International Monetary Fund projections:
  • FY26: 2.8%
  • FY27: 4.0%
• Inflation outlook remains benign, supported by:
  • Food & fuel disinflation
  • Good kharif harvest and rabi sowing
  • Gradual GST rationalisation pass-through

3. Sectoral Drivers of Growth

3.1 Agriculture: Stabilising Rural Demand

• Growth (FY26): 3.1%
• Agricultural GVA (H1 FY26): 3.6% (vs 2.7% in H1 FY25)
• Allied sectors (livestock & fisheries):
  • Stable growth of 5–6%
• Role:
  • Income security
  • Consumption smoothing
  • Rural demand stabilisation

3.2 Industry & Manufacturing: Momentum Builds

• Industrial sector growth (FY26): 6.2% (FY25: 5.9%)
• H1 FY26 growth: 7.0%, above pre-COVID trend.
• Manufacturing GVA growth:
  • Q1 FY26: 7.72%
  • Q2 FY26: 9.13%
• The PLI Catalyst (14 sectors):
  • Investment: ₹2.0 lakh crore
  • Incremental output: ₹18.7 lakh crore
  • Employment: 12.6 lakh jobs
• Innovation:
  • Global Innovation Index rank improved 66 (2019) → 38 (2025)

3.3 Services: Dominant Growth Engine

• Services growth (FY26): 9.1%
• Share in:
  • GDP: 53.6%
  • GVA: 56.4% (historic high)
• India is:
  • 7th largest services exporter globally
  • Global services trade share: 4.3% (2024) vs 2% (2005)
• Largest recipient of FDI
• Growth driven by IT, finance, professional & digital services

4. Employment & Labour Market Trends

• Total employment (Q2 FY26): 56.2 crore
• Net job creation: ~8.7 lakh (Q2 over Q1 FY26)
• PLFS indicators (Dec 2025):
  • LFPR: 56.1%
  • Female LFPR: 35.3%
  • WPR: 53.4%
  • Unemployment rate: 4.8%
• ASI FY24:
  • Organised manufacturing employment ↑ 6% YoY
• e-Shram portal:
  • 31+ crore unorganised workers
  • 54% women
• National Career Service (NCS):
  • 5.9 crore job seekers
  • 8 crore vacancies mobilised

5. External Sector & Trade Performance

5.1 Trade & Export Diversification

• Total exports:
  • FY25: USD 825.3 bn
  • H1 FY26: USD 418.5 bn
• India’s global merchandise export share:
  • 1% (2005) → 1.8% (2024)
• UNCTAD Trade & Development Report 2025:
  • India ranks 3rd in Global South in trade partner diversity.

5.2 Services Exports & Remittances

• Services exports (FY25): USD 387.5 bn (+13.6% YoY)
• Forex reserves (Jan 2026): USD 701.4 bn
  • Import cover: ~11 months
  • Covers 94% of external debt
• Remittances:
  • USD 135.4 bn (FY25) – highest globally

6. Industrial Output: IIP & Core Sector

• IIP growth (Dec 2025): 7.8% (2-year high)
• Manufacturing growth: 8.1%
• High-growth segments:
  • Electronics: 34.9%
  • Motor vehicles: 33.5%
• Core Industries (40.27% of IIP):
  • Cement: 13.5%
  • Steel: 6.9%
  • Electricity: 5.3%

7. Fiscal Developments

7.1 Fiscal Credibility

• Sovereign rating upgrades (2025):
  • Morningstar DBRS:
  • S&P Global:
  • R&I

7.2 Revenue & Taxation

• Revenue receipts:
  • 9.2% of GDP (FY25) vs 8.5% pre-pandemic
• Direct taxes share:
  • 58.8% of total taxes (FY25)
• Income Tax Return filings:
  • 6.9 cr (FY22) → 9.2 cr (FY25)

7.3 Capital Expenditure

• Effective capex:
  • 4% of GDP (FY25)
• SASCI:
  • States’ capex maintained at ~2.4% of GDP
• General government debt:
  • Reduced by 7.1 percentage points since 2020

8. Monetary & Financial Sector

8.1 Monetary Policy & Liquidity

• Repo rate cut: 100 bps → 5.25%
• Cash Reserve Ratio reduced to 3%
• Liquidity surplus:
  • Avg ₹1.89 lakh crore (FY26)

8.2 Banking Sector

• GNPA & NNPA at multi-decadal lows
• CRAR: 17.2%
• Credit growth (Dec 2025): 14.5% YoY
• MSME credit growth: 21.8%

8.3 Financial Inclusion & Markets

• RBI Financial Inclusion Index:
  • 64.2 (2024) → 67.0 (2025)
• Primary market mobilisation (FY26 till Dec):
  • ₹10.7 lakh crore
• Household financialisation:
  • Equity & MF share in savings: 15.2% (FY25)

9. Conclusion The Economic Survey 2025-26 presents an Indian economy marked by macroeconomic stability, diversified growth engines, low inflation, fiscal consolidation, and financial resilience. Strengthening external buffers, rising services dominance, improved employment indicators, and sustained capital expenditure collectively enhance India’s capacity to sustain high growth while preserving macroeconomic balance in a volatile global environment.