The 2025-26 Economic Survey departs materially from recent editions in how it frames risk. Rather than treating the global environment as a background variable to domestic policy choices, the Survey treats external pressure as a binding macroeconomic constraint, one that operates even when internal fundamentals are strong. This is a significant analytical shift, and it reflects the changing arithmetic of globalisation.

On standard indicators, India’s macro position is stable. Real GDP growth has averaged above 7 per cent over the past three years. CPI inflation has remained close to the 4 per cent target. The Union government’s fiscal deficit has declined from 6.4 per cent of GDP in FY23 to below 5 per cent, with public capital expenditure sustained at roughly 3.3-3.4 per cent of GDP. Foreign exchange reserves stand above $640 billion, covering more than 10 months of imports.

In 2025, despite stable inflation and fiscal consolidation, emerging-market currencies depreciated in tandem. India was no exception. Capital flows proved increasingly sensitive to geopolitical developments, supply-chain disruptions, and technology controls rather than domestic macro signals. At the same time, gold prices rose beyond $4,300 per ounce by the end of 2025 and crossed $5,100 in early 2026, levels inconsistent with inflation expectations alone and indicative of elevated global risk premia.

The Survey implicitly highlights a structural break, i.e., external prices are now driven more by global uncertainty than by country-specific fundamentals. This weakens the traditional emerging-market stabilisation framework, where fiscal prudence and inflation targeting were sufficient to anchor investor confidence.

India’s current account dynamics reinforce this diagnosis. The goods trade deficit remains structurally large, driven by energy imports, electronics, and intermediate manufacturing inputs. While services exports and remittances provide a substantial offset, the net position remains sensitive to external shocks.

The Survey avoids framing this as a short-term imbalance. Instead, it treats the trade deficit as a development-stage outcome, reflecting India’s position in global value........

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