At a press conference after the presentation of this year’s Economic Survey, the chief economic adviser to the Government of India, V. Anantha Nageswaran, described India’s economy as an oasis in a sea of turbulence. According to the Economic Survey 2025-26, India’s economy is expected to grow at around 7.4% in the current financial year. However, the projected growth rate for the coming year is lower — between 6.8%-7.2%. The Survey describes India’s macroeconomic performance as one of the best in recent times set in an international environment marked by unpredictable change and disorder. It also states that India’s fiscal health has been good: deficits are within targets; monetary policy has been able to contain inflationary trends; there has been impressive growth in physical and digital connectivity; the financial sector has shown a declining trend for non-performing assets; and social indicators of growth, such as rural development, healthcare and education, have performed satisfactorily. These are certainly comforting findings and they would raise the economy’s resilience in pushing back international headwinds in the coming year.
In this context, the Survey talks about the importance of increasing domestic capacities as well as the challenge of merging into still nascent, new, international supply chains. Optimistic rhetoric might be good in a year where a sense of foreboding and gloom looms over the global economy. Incidentally, the Economic Survey mentions three alternative international situations for 2026-27, with probabilities assigned for their actual occurrence. It is important to note that according to the Survey, some form of disruption is likely to continue into 2026, which could be much worse than that witnessed in 2025.
It is likely that the Government of India will stress-test the economy against worst-case scenarios. Therefore, it is worthwhile to flag some of the areas of concern that might affect the resilience of the economy. Household savings have been falling. This would lead to either lower flows of private investments, or higher dependence on foreign direct investments. The latter are themselves weakening, with a falling net foreign direct investment. Moreover, if the rupee continues its rapid depreciation against major currencies, investors would expect further decline and, hence, it would trigger even heavier outflows of international capital. Worryingly, wages have been stagnant. Household debt has been growing, enhancing financial risks. The Survey’s bullishness on private consumption expenditure growth is based on a debt-financed situation that could easily spiral into unsustainable territories. A very large part of the micro, small and medium industrial sector pertains to informal sector units, with low capability of standing up to modern competition. That is an area of concern. India’s environmental challenges have worsened. In the drive to accelerate physical production of goods and services, environmental standards are being tweaked. In the near future, this might become an adverse factor that could erode many policy-induced gains made in the quality of life of the average Indian. Finally, in recent years, the quality of India’s macroeconomic data has become suspect with even institutions like the International Monetary Fund. Hopefully, a turbulent 2026 would not throw up data-related surprises.