News

India’s economy is expected to grow 6.8–7.2 per cent in FY27, with potential growth estimated around 7 per cent, Finance Minister Nirmala Sitharaman said on Thursday while tabling the Economic Survey 2025–26 in Parliament. The Survey highlighted that India ended 2025 stronger than expected, supported by resilient domestic demand, structural reforms, and proactive policy measures, while Chief Economic Adviser V. Anantha Nageswaran described the rupee as a ‘victim’ of geopolitics and the global power gap.

The Survey highlighted India’s fiscal discipline, with the government achieving a fiscal deficit of 4.8 per cent of GDP against a budgeted 4.9 per cent, and targeting 4.4 per cent for FY27. India received upgrades from three credit rating agencies, including S&P’s upgrade from BBB- to BBB, marking the first major agency rating upgrade in nearly two decades.

Despite strong fundamentals, the Survey noted that the rupee remains undervalued, failing to reflect India’s macroeconomic strength. While a weaker currency offsets the impact of higher US tariffs on Indian goods, it highlights the importance of sustaining foreign capital inflows and maintaining external stability.

Rural consumption, supported by agriculture, and urban demand, boosted by tax rationalisation measures, continue to drive growth. Low inflation, stable employment, and rising purchasing power underpin broad-based consumption momentum, while robust bank balance sheets and credit growth support the overall flow of funds to businesses.

The Survey stressed that India’s manufacturing competitiveness is essential for durable currency and external stability. While IT and services exports have contributed strongly, goods exports remain critical. Recent trade agreements, including the EU-India Free Trade Agreement, are expected to enhance India’s manufacturing and export capacity.

Nageswaran outlined three global scenarios for 2026: managed disorder, disorderly multipolar breakdown, and systemic shock cascades, highlighting risks from geopolitical tensions, trade disruptions, and leveraged technology investments. India is relatively well-positioned thanks to a large domestic market, strategic autonomy, and strong forex reserves, though capital flow disruptions remain a key risk.

The Survey advocates for an entrepreneurial state, capable of acting under uncertainty and structuring risk while enabling private sector participation. Reforms in semiconductors, green hydrogen, state-level deregulation, and procurement exemplify early progress toward this approach. Fiscal and industrial policy should prioritise capital formation, human capital investment, and lowering the cost of capital, while targeted protection for upstream manufacturing ensures downstream export competitiveness.

India’s medium- and long-term growth will hinge on combining policy credibility, domestic growth, and strategic resilience. The Survey emphasised delayed gratification over short-term comfort, noting India must run “a marathon and a sprint simultaneously” to translate economic size into long-term strategic influence and a stable currency.