Decoding Economic Survey 2025-26: Five ideas that explain India's economy

Behind dense language, the Economic Survey 2025-26 lays out five clear arguments on growth, risk, manufacturing, governance and why stability now matters as much as speed

The Economic Survey, tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha on Thursday, has pegged India’s growth at between 6.8 per cent and 7.2 per cent for the financial year 2026–27. While the projection is largely in line with general growth forecasts, the Survey goes beyond arithmetic and addresses a larger question: how India should prepare itself for a world that is becoming increasingly unpredictable.

 

Bureaucratic phrasing and jargon aside, the Survey makes five broad arguments: capital, manufacturing, geopolitics, governance and risk. Here is how the Economic Survey, authored by Chief Economic Advisor V Anantha Nageswaran, adopts a more cautious, resilience-first approach to growth.

 

Why cheap capital is an outcome, not a policy lever

 

It is generally believed that when the Reserve Bank of India (RBI) cuts rates, loans automatically get cheaper. However, that rarely happens. Banks do not lend to customers at the same rate at which they borrow from the RBI. As a result, when the RBI slashes the repo rate, banks often pass on only part of the benefit. 

 

Borrowing costs depend less on marginal rate cuts and more on trust. Investors factor in low inflation, a stable currency and predictable policies before committing capital. Countries seen as stable secure cheaper funding, while those viewed as risky must pay more. Cheap capital, therefore, cannot be engineered through policy alone. It has to be earned.

 

The Survey notes that a country that persistently runs current account deficits and depends on foreign savings must, by definition, pay a risk premium to global capital. India’s long-term challenge is not merely to manage liquidity or credit cycles, but to transform itself into a surplus-generating economy. Only then can its cost of capital fall sustainably.

 

Why manufacturing is macroeconomic insurance, not nostalgia

 

India’s strongest advantage globally lies in services exports, especially information technology and financial services. Along with hospitality and tourism, the services sector has powered growth and foreign exchange earnings. 

 

However, the Survey warns that services alone cannot do all the heavy lifting. The Covid-19 pandemic was a stark reminder that services can boost the economy, but cannot structurally anchor it during global shocks.

 

Manufacturing provides that anchor. Factories operate on longer contracts, generate large-scale employment and bring in more predictable foreign exchange. These inflows help stabilise the currency and the broader economy.

 

The Survey notes: “Services have done much of the heavy lifting, creditable and macro-stabilising, but are not a substitute for the goods-based export ecosystems that ultimately underpin durable external and currency stability.”

 

Why the global system no longer rewards good behaviour

 

For several years now, the rules-based global order has been steadily weakening. US President Donald Trump imposed a 25 per cent tariff on Indian goods, citing the need to protect American interests, and later levied a penalty on India for trading with Russia, particularly for buying Russian oil. India contested the move, noting that other countries were doing the same.

 

Similar pressures have confronted several economies, forcing nations to prioritise bilateral arrangements to safeguard their interests. India and the United Kingdom signed their largest-ever free trade agreement, followed by a major trade deal with the European Union, dubbed the “mother of all deals”.

 

Even fiscally disciplined economies are facing currency swings and volatile capital flows. The Survey observes that geopolitics now shapes trade flows as much as economics. “The external environment will require India to prioritise both domestic growth maximisation and shock absorption, with a greater emphasis on buffers, redundancy and liquidity.”

 

Why state capacity matters more than state size

 

Businesses often point to India’s dense regulatory framework as a key constraint, with overlapping rules, paperwork and delays raising costs and dampening investment sentiment. The Survey flags these frictions and argues that the solution may not lie in a smaller state, but a more effective one.

 

It notes: “The presence of an entrepreneurial state does not mean a state that replaces markets, but one that is willing to experiment, take calculated risks, absorb failures, and dynamically reallocate support.”

 

The emphasis shifts the debate away from big versus small government towards state capacity: the ability to execute efficiently, enforce rules credibly and adapt when policies fail.

 

Why risk management is now a growth strategy

 

Over the past decade, financial crises, pandemics, supply-chain disruptions and wars have shown policymakers that uncertainty is no longer episodic, but structural. The US–China trade war, the Covid-19 pandemic and the Russia–Ukraine conflict have repeatedly disrupted global growth.

 

The Economic Survey signals a shift in India’s policy philosophy. Growth is no longer just about pushing investment or demand, but about managing risk. Risk management, the Survey suggests, has become a growth strategy in itself.

 

The tone is optimistic but cautious. Growth, it argues, is not about accelerating at all costs, but about building buffers so the system can absorb shocks without derailing.

 

Taken together, the message is clear. In a volatile world, speed alone will not suffice. Sustainable growth will depend on resilience, manufacturing depth and capable institutions. The Survey makes the case for balance, suggesting that steady execution, rather than breakneck expansion, may be India’s most reliable path to long-term economic security by 2047.