Growth is holding up, but the economy is facing elevated risks. That sums up the message elaborated over 687 pages of the Economic Survey tabled Thursday. Chief Economic Advisor V Anantha Nageswaran described the current financial year as an “oasis of performance”, while warning that the next could see “decadal highs in global economic uncertainty”.
The survey explains that timely tax reforms and a steady rise in urban consumption have driven GDP growth for 2025-26 past the earlier 6.3-6.8 percent projection to 7.4 percent. For the coming fiscal, the growth estimate has been revised to 6.8-7.2 percent. Fiscal consolidation has kept the deficit on target at 4.8 percent, almost half the 9.2 percent clocked in 2021. Headline retail inflation, too, remains in control at 1.7 percent, with food and fuel prices in check. The downside is that India’s strong performance has “collided with a global system that no longer rewards macroeconomic success”, as evident in the continuing slide of the rupee, which hit an all-time low of 92 against the dollar on the morning of the survey presentation.
The writing is on the wall: investors are unwilling to commit to India. The survey quotes the Lowy Institute’s Power Gap Index to suggest India is operating well below its strategic potential. To weather the global “uncertainty, fragility and episodic shocks”, the survey recommends managing competitiveness in the manufacturing and export sectors by reducing excessive protection and providing easier access to capital. It also bats for the evolution of an ‘entrepreneurial state’, which would structure risk rather than avoiding it.
To transform the rural economy, the survey proposes creation of smart villages through technology-enabled schemes that take a whole-village approach rather than programme-based interventions. While noting a glaring lack of civic contract on part of citizens, it suggests converting property tax into a self-updating capital-value tax to raise large cities’ own revenues.
The CEA warns that the path towards a more resilient economy will be long grind. He quotes from the Katha Upanishad to suggest that “the country stands to gain immensely when all of us embrace delayed gratification”. In other words, strap on your seatbelts—the coming year is likely to be a bumpy ride.