On Sunday, 1 February 2026, Finance Minister Nirmala Sitharaman will present her ninth Annual Budget. Before that, on 29 January, she laid before Parliament the Economic Survey for the financial year 2025–26.

It’s Different This Time

This year’s Economic Survey makes a departure from tradition on the following counts:

The Importance

Prepared by the Economics Division of the Department of Economic Affairs under the Ministry of Finance, the annual Economic Survey of India is a key document that reviews the economy’s performance and shapes policy discussions.

It provides critical insights ahead of the Union Budget, and its importance, among others, lies in the following:

Economic Review: It analyses macroeconomic indicators such as GDP growth, inflation, the fiscal deficit, and sectoral performance over the past year, highlighting achievements and challenges.

Policy Guidance: It outlines government priorities, reform ideas, and a roadmap for fiscal measures without being binding.

Stakeholder Value: The Survey offers data-driven insights for policymakers, researchers, investors, and businesses to assess stability, the investment climate, and long-term trends.

Backdrop: Resilience Amidst The Global Risk Scenario

But before I analyse the Survey, I must put into perspective the overall geopolitical risks which the Survey considers important for the country going forward.

The three scenarios are:

However, the Survey argues that India is far better positioned today than it was during previous global shocks. Strong foreign exchange reserves, a resilient banking system, diversified service exports, and improved fiscal credibility provide buffers.

Even in the worst of the global geopolitical risk scenarios, growth will taper somewhat but will not collapse, unlike in past crises.

Key Insights

One, GDP Growth: Despite global headwinds (geopolitical tensions, trade disruptions, worsening vulnerabilities and fragmented supply chains, among others), the Indian economy has maintained strong growth momentum in FY26, with the First Advance Estimates placing real GDP growth at 7.4 per cent, with growth largely driven by domestic demand, a manufacturing surge, a revival in private capital expenditure, and robust domestic investment, positioning India as the fastest-growing major economy.

The Survey projects that in FY2026–27, India is set to continue its growth momentum, with likely GDP growth of 6.8–7.2 per cent, supported by sustained domestic demand, export momentum, and infrastructure.

Looking ahead, the Economic Survey concludes that while global uncertainties remain elevated, domestic growth drivers are expected to continue supporting economic activity, and in the medium term, the Indian economy is poised to grow at 7 per cent, positioning it on a path of steady expansion amid global uncertainty.

I say that while the Survey talks of a medium-term growth certainty of 7 per cent (breaking away from 6.5 per cent growth over past two decades), it raises many red flags that need to be addressed for the country’s growth to move from a 7 per cent to 7.5-8 per cent trajectory. The two biggest red flags are a political economy dominated by repeated pre-election giveaways and a lack of skilling (proper skilling can increase employment by 12 per cent) and targeted reforms.

All said, while the Economic Survey ticks most of the problems right, it does not provide a pathway to achieve sustained real GDP growth of around 8–10 per cent annually from its current ~$4 trillion base (2025) for the country to become a developed nation by 2047 — roughly equivalent to a $25–30 trillion economy with per capita income of $15,000–20,000 (PPP-adjusted). Rather, its prognosis is that the GDP growth in the range of 8-9 per cent is not a feasible proposition.

The Economic Survey does not provide a nostrum for the country to become a Viksit Bharat.

Secondly, Inflation in the Comfort Zone: The Survey notes that domestically, retail inflation (CPI) has followed a clear downward trajectory, reaching 1.7 per cent in 2025–26, driven primarily by a steep decline in food prices — especially vegetables, pulses and spices — supported by favourable agricultural conditions and timely policy interventions.

Core inflation, too, while appearing sticky, is shown to be largely influenced by surges in precious metals; when these are excluded, underlying inflationary pressures are more subdued. The analysis highlights the critical role of government interventions in stabilising food and edible oil prices.

As regards the year ahead, the Survey projects that the outlook remains favourable, with inflation within target ranges, supported by strong........

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