Economic survey 2026 live: India can grow at 6.8% to 7.2% next year, the world may not let it

The Economic Survey stresses that India needs a stable and predictable agricultural export policy to achieve its target of USD 100 billion in combined exports of agriculture, marine products, and food and beverages over the next four years, up from USD 51.1 billion in FY25. Agricultural exports are described as a high-potential opportunity with significant global leverage, provided policies balance domestic food security with export growth.

Despite being the world’s second-largest agricultural producer by value, India accounts for only 2.2% of global agricultural exports, up from 1.1% in 2000, indicating substantial untapped potential. Agricultural exports grew at an 8.2% CAGR between FY20 and FY25, faster than overall merchandise exports. However, exports have stagnated since FY23, even as global agricultural trade expanded.

The Survey warns that frequent policy interventions such as export bans and minimum export prices, though aimed at controlling domestic inflation, disrupt supply chains, erode market confidence, and risk permanent loss of export markets. It recommends alternatives such as buffer stock management, targeted food subsidies, market interventions, and strict anti-hoarding enforcement to stabilise domestic prices without undermining export credibility.

Policy predictability is crucial to uphold India’s trade commitments and avoid disputes under international trade and agricultural subsidy frameworks.

The Economic Survey notes that India’s export trajectory since the start of the millennium shows a clear dominance of services over goods. Over the five years since 2020, total exports grew at a compound annual rate of 9.4%, while merchandise exports expanded at a slower 6.4%. Services exports have played a stabilising macroeconomic role and driven growth, particularly through IT-enabled services. However, the Survey cautions that services alone cannot replace the goods-based export ecosystems needed for long-term external sector and currency stability.

The Survey highlights that while services exports are valuable, they do not necessarily force broad institutional or state-capacity upgrades, as firms can bypass weak domestic systems, relocate easily, and exert limited pressure for economy-wide reform. Manufacturing exports, by contrast, impose fiscal, employment, and logistical demands that strengthen state institutions—underscoring why manufacturing remains essential.

The analysis supports a calibrated industrial policy approach consistent with WTO rules, emphasising competitiveness and capacity-building rather than protectionism.

The Economic Survey notes that despite elevated global uncertainties, domestic growth drivers are expected to continue supporting economic activity. With macroeconomic stability in place and ongoing reforms, the economy appears well-positioned to sustain near-term growth. The outlook for FY27 will be shaped by strong domestic fundamentals alongside evolving external conditions. India’s medium-term growth potential has been strengthened to 7%, placing the economy on a steady expansion path amid global volatility.

The outlook reinforces continuity in reform-led governance and medium-term fiscal and economic planning under India’s constitutional budgetary framework.

Domestic demand continues to underpin economic growth in FY26. According to the First Advance Estimates, the share of private final consumption expenditure in GDP rose to 61.5%, the highest since FY12. This is reflected in strong first-half performance, with PFCE growing by 7.5% in H1 FY26 and its GDP share at 61.4%, marking the fastest growth since H1 FY23 and remaining above the pre-COVID trend. The strength in consumption is supported by low inflation, stable employment, rising real incomes, robust rural demand due to strong agricultural output, and improving urban consumption following tax rationalisation, the Survey notes.

Consumption-led stability reflects the effectiveness of macroeconomic management within statutory monetary and fiscal policy mandates.

The Economic Survey states that although domestic demand remained the primary driver of growth in FY26, external demand also played a supportive role, accounting for 21.6% of GDP. In the first half of FY26, exports of goods and services grew by 5.9%, exceeding growth recorded in the same period last year and remaining above the pre-pandemic average. Trade diversification supported export resilience. Services exports continued to act as a stable growth anchor, partially offsetting volatility in goods exports amid tariff-related uncertainties.

The resilience of services exports underscores India’s comparative advantage under global trade-in-services frameworks and existing bilateral and multilateral trade commitments.

The Economic Survey signals a clear move away from short-term macroeconomic management towards a “delayed gratification” framework, arguing that sustainable growth depends on long-term investments in productivity, institutions, and factor markets. It upgrades India’s medium-term growth outlook by focusing on capital formation, urbanisation, logistics, and state-level reforms, recognising that execution at the state level is critical. Manufacturing is positioned as a strategic necessity for export resilience, supply-chain integration, and technology diffusion, rather than protectionist nostalgia. Industrial policy is reframed around innovation, scale, and lowering the cost of capital. The Survey also reflects a shift in the state’s role—from direct producer to an entrepreneurial enabler that absorbs early risk and crowds in private investment, says Rishi Shah of Grant Thornton Bharat.

This approach is consistent with competitive federalism and decentralised implementation within India’s constitutional economic structure.

The Economic Survey notes that private consumption is expected to pick up further, aided by low inflation, steady income growth, tax rationalisation, and improving demand conditions. Consumption has reached its highest share of GDP in a decade. Investment remains a key growth anchor, with Gross Fixed Capital Formation growing by 7.6% and holding close to 30% of GDP, well above pre-pandemic levels, indicating a sustained investment cycle revival. Exports have shown resilience despite global headwinds, while the fiscal deficit is projected to decline to 4.4% in FY26. Given external volatility, the upcoming Budget is likely to prioritise fiscal consolidation, says Vaibhav Porwal of Dezerv.

The emphasis on consolidation aligns with fiscal discipline obligations under the FRBM framework while preserving space for growth-oriented capital expenditure.

Chief Economic Advisor V. Anantha Nageswaran said the Economic Survey has upgraded India’s potential growth rate to 7% per annum, from 6.5% estimated three years ago. He attributed the revision to sustained public investment, improved financial sector health, state-level deregulation, and structural reforms undertaken by the Union government. Despite geopolitical uncertainties, he said empirical performance and reform momentum justify a higher long-term growth outlook.

Potential growth estimates guide medium-term fiscal planning under constitutional budgetary processes and inform public investment prioritisation under Article 112.

The Economic Survey emphasised that industrial protection should not be permanent and must be conditional on productivity gains and export performance. Drawing lessons from Northeast Asian economies such as Korea, Japan and Taiwan, it stated that domestic industry support should be time-bound and benchmarked against global competitiveness. The Survey highlighted the need for deregulation, cluster-based manufacturing, cost reduction in power and logistics, policy stability, infrastructure development, and talent ecosystem building. It stressed that protection without performance accountability weakens competitiveness.

The approach mirrors conditional industrial policy models and is consistent with international trade norms that discourage indefinite protectionism without efficiency outcomes.

Ranen Banerjee of PwC India said the Economic Survey presents a realistic assessment of India’s economic position, describing it through the concepts of “strategic sobriety” and managing short-term growth alongside long-term sustainability. He noted that while inflation has been contained through supply-side improvements and infrastructure investment, risks remain from capital outflows and high cost of capital. He said elevated deficits, particularly at the state level, reduce business competitiveness. Banerjee highlighted the Survey’s recommendation to significantly reduce debt, reform customs duties to support MSMEs, and incentivise fiscal discipline among states. The Survey pegs GDP growth between 6.8% and 7.2%, with potential growth at 7%.

The observations directly relate to fiscal federalism and debt sustainability principles under the FRBM framework and state-level fiscal responsibility laws.

Chief Economic Advisor V. Anantha Nageswaran said rising per capita income naturally leads to higher imports, citing China’s experience where income growth coincided with expanding imports. He said India’s long-term growth trajectory from roughly $2,500 to a projected $20,000 per capita income will similarly increase import demand, requiring higher exports or capital inflows to finance it. He added that the recent rupee depreciation is not unique to India, noting that countries with current account deficits have faced similar currency pressures. He said the rupee’s long-term performance remains relatively strong.

The remarks align with balance-of-payments theory under open economy macroeconomics and fall within the RBI’s exchange rate management mandate under the RBI Act, 1934.

Chief Economic Advisor V. Anantha Nageswaran said global trade has shifted away from neutrality, with supply chains increasingly used as tools of state power. Citing global disruptions, he argued that prioritising domestic capabilities through Swadeshi is a legitimate policy response. He said nations must safeguard strategic interests and should not hesitate to adopt domestic-first policies in a non-reciprocal global trading environment.

The statement reflects a shift from classical free-trade assumptions towards strategic trade policy, consistent with WTO flexibilities that allow domestic safeguards in national interest and supply security.

The Economic Survey stated that economic policy in 2026 must prioritise supply stability, diversification of trade routes and payment systems, and the creation of financial and resource buffers. It emphasised that policy credibility, predictability and administrative discipline are becoming strategic assets rather than mere governance ideals. The Survey described the recommended policy approach as strategic sobriety, balancing domestic growth with shock absorption amid global uncertainty.

The emphasis aligns with fiscal responsibility principles under the FRBM framework and highlights the increasing legal importance of regulatory consistency and institutional trust in economic governance.

The Economic Survey noted that the Indian rupee underperformed in 2025 due to structural trade imbalances. India persistent goods trade deficit has not been fully offset by surpluses in services exports and remittance inflows. The Survey highlighted that India reliance on foreign capital inflows makes the currency vulnerable when global investment flows weaken.

Currency stability falls within the mandate of the Reserve Bank of India under the RBI Act, though external capital movements remain influenced by global market conditions beyond direct regulatory control.

Finance Minister Nirmala Sitharaman tabled the Economic Survey for the 2025 to 26 financial year in Parliament, marking the formal beginning of the Union Budget process. The Survey serves as the government annual assessment of economic performance and policy direction. It is released in two volumes, with the first providing macroeconomic analysis and projections, and the second offering sector wise data and statistical assessments. Sitharaman is set to present her ninth consecutive Union Budget on February 1.

While not a statutory document, the Economic Survey functions as an authoritative policy reference that informs fiscal decisions made under Articles 112 and 113 of the Constitution.

The Congress party criticised Prime Minister Modi remarks ahead of the Budget session, alleging that he follows a recurring pattern of delivering public addresses without substantively engaging the opposition. Party spokesperson Jairam Ramesh claimed the Prime Minister does not convene or chair all party meetings on key national issues and introduces legislation late in sessions, limiting parliamentary scrutiny. The Congress also alleged that Modi avoids direct participation in parliamentary questioning.

The criticism touches on parliamentary conventions relating to legislative debate, scrutiny and executive accountability, which form the backbone of India constitutional parliamentary democracy though not always judicially enforceable.

Prime Minister Narendra Modi said India democracy and demographic strength represent a major source of hope for the global community. Addressing Parliament at the start of the Budget session, he said the country has an opportunity to demonstrate its commitment to democratic decision making and institutional continuity. Modi urged Members of Parliament to prioritise solutions over disruption, stressing that governance must focus on implementation and last mile delivery rather than obstruction.

The statement reinforces the constitutional principle of parliamentary functioning under Articles 79 and 80, emphasising legislative cooperation and democratic accountability within institutional frameworks.