India’s economy is firing on all cylinders and is an “oasis” of strength, according to the government’s Economic Survey.
Even with the global outlook darkening, growth could top 7 per cent in the coming financial year, putting it well ahead of other major economies for a fourth consecutive year.
The projection of 6.8 per cent to 7.2 per cent growth is based on strong household spending, robust public investment, and inflation at multi-year lows.
The survey, an annual report card on the state of the economy, was released just days ahead of Sunday’s federal budget.
“India is an oasis of economic performance in the global scenario. The growth numbers stand out compared to any other part of the world,” said Chief Economic Adviser V.A. Anantha Nageswaran as he presented the report.
Inflation has cooled dramatically, rising just 1.7 per cent in 2025–26, helped by cheaper food, record agricultural output, and easing interest rates. Indian households are spending, with household consumption now making up over 61 per cent of the economy, the highest level in more than a decade.
The government’s finances are looking healthier too. The fiscal deficit came in below target at 4.8 per cent of GDP last year and is expected to shrink further to 4.4 per cent this year, keeping the promise to reduce spending.
“These conditions provide resilience against external shocks and support the continuation of growth momentum,” the report says.
The longer-term outlook is even brighter.
The survey estimates India’s growth potential has risen to 7 per cent, up from 6.5 per cent a few years ago, thanks to policy reforms and a surge in public spending on roads, railways, ports, and digital infrastructure.
“The cumulative impact of policy reforms over recent years appears to have lifted the economy’s medium-term growth potential closer to 7 per cent,” the survey states. “The outlook is therefore one of steady growth amid global uncertainty, requiring caution, but not pessimism.”
India remains on a strong economic footing despite slowing world growth, mounting international political risks, and persistent trade tensions with the United States, the country’s biggest export market.
For Union finance minister Nirmala Sitharaman, the budget challenge will be to reinforce that momentum while keeping a lid on the deficit, even as elections loom in key states such as Tamil Nadu and Bihar.
“The budget will focus on both resilience and growth,” said Dharmakirti Joshi, chief economist at ratings agency Crisil. “The emphasis will be on maintaining fiscal discipline, sending the right signal for reforms, and encouraging private investment through incentives and policy adjustments.”
The survey’s growth expectation, tabled in Parliament, is slightly below the estimated 7.4 per cent expansion projected for the current financial year to March. But analysts say it still allows for a budget that prioritises capital spending and fiscal discipline without a big-spending stimulus.
The survey’s projections align with the IMF’s forecast of 7.3 per cent growth for the coming fiscal year and the World Bank’s expectation of 7.2 per cent expansion.
Despite the survey’s optimism, markets remain jittery. The rupee hit a record low of 91.9850 per dollar on Thursday, while foreign investors withdrew a record $19 billion from Indian shares in 2025, continuing to sell this month as they sought safer, higher-yielding options abroad.
The government’s optimism contrasts with China’s struggles to regain momentum amid a long property downturn and weak consumer confidence, with growth expected to remain well below India’s pace.
The survey points to India’s large domestic market, sustained public investment, and rising middle-class consumption as buffers against shocks. The government is betting that these factors will allow strong growth even as much of the world slows, despite the ongoing trade standoff with Washington.
New Delhi remains one of the few large economies without a trade deal with the US and faces punitive tariffs of up to 50 per cent on key exports. The government is offsetting this through accelerated reforms, GST cuts, labour law changes, and four free trade agreements, including a landmark new pact with the European Union concluded after nearly two decades of stop-start talks.
The survey flagged hope on the US trade talks, saying that ongoing negotiations could conclude this year.
India’s strong economic fundamentals were recognised in 2025 with its first major credit rating upgrade in nearly two decades, from BBB-, the lowest investment-grade category, to BBB, the middle tier, signalling improved financial health and lower risk for investors.
However, sceptics warn that India’s growth still relies heavily on government spending, while private investment, jobs, and household incomes lag. Labour-intensive manufacturing is failing to create enough employment for young workers, and export vulnerabilities make the boom appear fragile.