The overall sentiment of the Economic Survey 2025-26 is the “Goldilocks Moment” — a rare state of high growth and low inflation, which has propelled India to become the fourth largest economy in the world, surpassing Japan.
The Economic Survey 2025-26 was tabled in Parliament on January 29, 2026. It provided an overall account of resilience and robust recovery, estimating India’s real GDP growth at an impressive 7.4 percent for the current fiscal year (FY26).
The document emphasises strong macroeconomic stability anchored by record foreign exchange reserves, controlled inflation, and a committed path to fiscal consolidation.
Sustaining a Capital Expenditure (Capex) at a record high of ₹11.11 lakh crore is fundamental to the government’s core strategy.
The survey also highlights that the global economic environment is currently uncertain due to geopolitical tensions, trade disruptions, and differing growth and inflation rates among major economies. Despite some short-term resilience, there are underlying vulnerabilities such as high fiscal pressures, fragmented supply chains, and a growing reliance on economic policy tools for strategic reasons.
Key Sectoral Highlights
The Survey highlights the following official growth estimates for GVA in FY26:
- Agriculture and Allied Services
The survey estimates the agriculture sectoral growth at 3.1 percent for FY26, supported by a favourable monsoon and robust performance in allied sectors like livestock (195 percent growth since FY15) and fisheries.
For the first time, horticulture production (362.08 MT) is estimated to have surpassed foodgrain production (357.7 LMT) in 2024-25. The Survey notes record foodgrain production of 357.7 Million Tonnes (MT) or 3,577.3 Lakh Metric Tonnes (LMT), ensuring national food security.
The Economic Survey reports a 3.6 percent agricultural Gross Value Added (GVA) growth in the first half of the current fiscal year, indicating initial higher growth due to a favourable monsoon.
However, the full-year estimate is lower at 3.1 percent, suggesting a slowdown in the second half of the year.
- Manufacturing
The Survey estimates Manufacturing GVA to grow at 7.0 percent for the full year (FY26). This is mainly driven by ‘Make in India’ initiatives, the Production Linked Incentive (PLI) schemes, and a focus on structural transformation.
Consequently, the broader industrial sector is projected to see a modest gain in momentum, rising from 5.9 percent in FY25 to 6.2 percent in FY26.
However, the Survey acknowledges that while public Capex has been a robust anchor, the ‘crowding in’ of private investment remains a challenge. This is evidenced by Gross Value of Output (GVO) remaining ‘broadly stable’ at around 38 percent, indicating that output has been sustained.
The Electronics sector is a significant success story, now ranking as India’s third-largest export category. However, it stands out as a high-tech outlier within an industrial environment where manufacturing’s contribution to GVA at current prices has diminished to 14 percent.
- Services
The engine of the Indian economic growth story is the service sector. The undisputed powerhouse of the economy is estimated to grow at a robust 9.1 percent for FY 26. The sector contributes nearly 55-60 percent of India’s total GVA. It acts as the primary anchor of stability, high-growth and employment.
The growth momentum is mainly driven by a strategic pivot toward Gen AI-driven services and the expansion of Global Capability Centres (GCCs).
India continues to strengthen its position as a leader in digitally delivered services, with service exports showing resilience despite a moderated global environment.
With forex reserves surpassing $700 billion, a new historical high, India demonstrates robust financial health, capable of covering imports and mitigating global uncertainties.
Despite inherent volatility, the Current Account Deficit (CAD) remains within sustainable limits, moderating to 0.8 percent of GDP in H1 FY26. This is due to robust growth in services exports, which reached an all-time high of $387.6 billion in FY25 and a consistent surge in inward remittances totalling $135.4 billion.
The document contains 16 chapters focusing on a new vision of Strategic Indispensability, which emphasises macroeconomic stability anchored by record foreign exchange reserves, controlled inflation, and a committed path of fiscal consolidation.
Conclusion: Behind the ‘Goldilocks’ Veil
The Economic Survey 2025-26 comes at a point of celebration of the ‘Goldilocks Moment’ – a combination of high growth (7.4 percent GDP) alongside historically low inflation (around 1.7 percent), which provides a stable macroeconomic environment for policymakers to support further expansion. This is a compelling case for any economy and a national achievement.
The 7.4 percent GDP estimation is largely built upon the strong performance of the first half (H1) of the fiscal year, indicating a moderation in the second half’s growth trajectory.
This is supported by indicators such as the Manufacturing PMI, which has eased to 51.9, and core industry data showing a modest growth average of 3.5 percent, which aligns closely with pre-pandemic levels.
In the industrial sector, the Survey notes that the Gross Value of Output (GVO) remains ‘broadly stable’ at around 38 percent, indicating sustained output. Simultaneously, the manufacturing sector’s contribution to GVA at current prices has diminished to 14 percent. This reflects a compositional shift and potential margin pressures rather than a broad structural expansion of the sector’s overall weight in the economy.
Consequently, growth in the manufacturing sector may face increased structural headwinds.
The domestic financing landscape also shows notable changes. While household financial savings have improved from recent lows, they have not yet recovered to the robust levels seen in the 2011-12 period.
This moderation in savings, coupled with a shift towards physical assets and higher household debt, implies a reduced buffer for domestic capital availability.
This becomes a key consideration given the Survey’s observation that the ‘crowding in’ of private investment activity is a continued challenge, remaining primarily in the stage of corporate announcements rather than widespread physical execution.
The essential message conveyed is one of prudent optimism.While the $701 billion forex reserves offer strong external stability, the 7.4 percent growth rate’s sustainability relies on skillfully managing internal constraints in domestic capital mobilisation and achieving a significant increase in private investment alongside continued public spending.
No doubt, it is a great moment.
However, the key unsaid takeaway is that policymakers have more room to operate, but with constraints. The upcoming budget will be more challenging for policymakers, because they to have carry out a strong balancing act by increasing capex allocation yet adhering to fiscal consolidation.
