The Economic Survey 2025-26, tabled in Parliament on Thursday, has put forward a comprehensive vision for India's economic transformation, emphasizing the need for simpler tax systems, decriminalization of technical offences, and enhanced financial architecture to propel the nation toward its Viksit Bharat goals by mid-century.
Growth Projections and Economic Vision
The Survey projects a robust growth trajectory for the domestic economy, estimating expansion at 6.8-7.2% in FY27. Furthermore, it elevates India's medium-term growth potential closer to the 7% mark, signaling confidence in the country's economic resilience and future prospects.
Call for Tax and Regulatory Reforms
Central to the Survey's recommendations is a push for rational taxation and regulatory clarity. It advocates for tax systems that are simpler and more service-oriented, alongside a time-bound and fair dispute resolution mechanism. The decriminalization of technical offences is highlighted as a critical step to foster certainty and predictability in the business environment, thereby enabling effective capital mobilization.
The document underscores that development is not merely about increased spending but about expanding the productive base. This requires an enabling environment where firms can invest and scale, households can earn and save securely, and markets can channel capital efficiently. Regulators are urged to promote competition and innovation while safeguarding stability, moving beyond traditional bank dominance through deeper financial markets and modern infrastructure.
Deepening Long-Term Finance
To sustain growth, the Survey emphasizes the necessity of strengthening long-term capital markets. It points out that corporate bond markets remain shallow and illiquid, dominated by top-rated issuers, with limited securitization, underdeveloped municipal bonds, and conservative investment by pension and insurance funds due to regulatory inertia.
A six-point agenda is proposed to address these barriers:
- Rationalizing tax treatment of debt instruments
- Creating credit enhancement facilities for lower-rated issuers
- Standardizing securitization structures and disclosures
- Building municipal financial capacity and pooled bond mechanisms
- Revising investment guidelines for long-term funds
These reforms aim to supply the scale and maturity needed for infrastructure and climate financing while lowering the economy's overall cost of capital.
Addressing the Elevated Cost of Capital
The Survey identifies India's relatively high cost of capital as a significant constraint on private investment and long-run growth. Historical data from 1995 to 2025 shows India's weighted average long-term interest rates at 7.61%, higher than developed economies like Canada (3.13%), Italy (2.94%), and Switzerland (1.04%), though favorable compared to emerging economies such as Indonesia (14.1%), Mexico (11.05%), and South Africa (9.08%).
Reducing this cost requires attention not only to financial intermediation but also to broader economic drivers. Policies supporting firm-level scale, deregulation, improved logistics, infrastructure, trade facilitation, deepened technological capabilities, and enhanced research and development (R&D) are essential. These measures can strengthen productivity and margins in manufacturing, enabling sustained participation in global value chains.
In summary, the Economic Survey 2025-26 outlines a strategic roadmap for India's economic advancement, focusing on regulatory ease, financial deepening, and productivity enhancements to achieve higher growth and global competitiveness.
