Economic Survey Forecasts Robust 6.8-7.2% GDP Growth for Next Fiscal Year
The Economic Survey 2025-26, presented in Parliament on Thursday, has projected India's GDP growth to range between 6.8% and 7.2% for the upcoming fiscal year. This optimistic forecast is attributed to the cumulative impact of policy reforms implemented over recent years, which the document states are elevating India's medium-term growth potential to approximately 7%. While this projection is slightly lower than the current fiscal year's estimated 7.4% growth, the Survey emphasizes that the Indian economy remains on a stable and resilient footing.
Rupee Valuation and Global Economic Dynamics
Amid significant depreciation of the domestic currency in recent months, the Economic Survey highlighted that the rupee's current valuation does not accurately reflect India's strong economic fundamentals. The document, prepared by a team led by Chief Economic Advisor V Anantha Nageswaran, noted that the rupee is "punching below its weight" and has become a casualty of reduced foreign capital flows.
Interestingly, the Survey pointed out that an undervalued rupee offers some advantages in the current global context. It helps offset the impact of higher American tariffs on Indian goods and mitigates inflationary pressures from costly crude oil imports. However, this undervaluation also causes investor hesitation, warranting careful examination of factors influencing foreign investment decisions.
The document stressed that a strong and stable currency is essential for achieving India's Viksit Bharat goals and enhancing its global influence. It acknowledged that while India is relatively better positioned than many other nations due to robust macroeconomic fundamentals, the country must prioritize domestic growth in an uncertain global environment while strengthening economic buffers and liquidity.
Fiscal Discipline and Trade Performance
On fiscal matters, the pre-Budget document confirmed that the central government remains on track to achieve its fiscal consolidation targets. It aims to attain a fiscal deficit of 4.4% of GDP in 2025-26, with the current deficit standing at 62.3% of Budget Estimates as of November 2025. Financial markets have responded positively to this fiscal discipline, as evidenced by declining sovereign bond yields and reduced spreads over US bonds.
The Survey reported encouraging trade statistics despite global challenges. Merchandise exports grew by 2.4% during April-December 2025, while services exports increased by 6.5% during the same period. Merchandise imports rose by 5.9%, and the current account deficit remained moderate at 0.8% of GDP in the first half of FY26.
Notably, the document highlighted that remittances have consistently exceeded gross FDI inflows in most years, underscoring their crucial role as a key source of external funding for the Indian economy.
Strategic Opportunities and Sectoral Insights
The Economic Survey identified several strategic opportunities for India in the evolving global landscape. It emphasized that geopolitical realignments are reshaping investment patterns, supply chains, and growth prospects worldwide. The possible eruption of multiple global crises presents India with an opportunity to play a more significant role in shaping the emerging global order.
Regarding trade agreements, the Survey noted that India's numerous free trade agreements, particularly the upcoming FTA with Europe, will strengthen manufacturing competitiveness, export resilience, and strategic capacity. However, realizing the full potential of these agreements requires India to enhance its production competitiveness.
The document dedicated a separate chapter to artificial intelligence and its economic impact, warning that overly optimistic asset valuations could correct if AI fails to deliver anticipated productivity gains.
In the aviation sector, the Survey highlighted India's emergence as the world's third-largest domestic aviation market, supported by favorable policies, rising demand, and steady infrastructure expansion. However, it noted that current passenger volumes represent only a fraction of the country's true potential in this sector.
Policy Recommendations and Future Outlook
The Economic Survey made a strong case for developing deeper system-level institutional capacity that accounts for the geopolitical implications of India's economic rise. It recommended policies to reshape working conditions for gig workers and emphasized that the GST restructuring and other reforms have helped convert global uncertainty into domestic opportunities.
The document projected that the next fiscal year would be a period of adjustment as the economy adapts to recent changes. While acknowledging there is "no space for pessimism", it advised maintaining caution amid global uncertainties. The Survey concluded that India's strong macroeconomic fundamentals, combined with continued reform implementation, position the country favorably for sustained growth in the coming years.
