Eco Survey highlights: Domestic demand in focus amid global uncertainties
India's economy is expected to grow 6.8-7.2% in 2026-27; exports, domestic demand and reforms support growth, while global trade tensions pose some risks
 "Eco Survey highlights: Domestic demand in focus amid global uncertainties")
India’s economy is projected to grow between 6.8 per cent and 7.2 per cent in the financial year 2026-27, according to the Economic Survey. This is slightly below the 7.4 per cent growth estimated for the current financial year, indicating a modest slowdown.
The survey aligns with the International Monetary Fund (IMF) outlook, which recently raised India’s growth estimate for 2025-26 to 7.3 per cent, up 0.7 percentage points from its October forecast. The IMF also upgraded its forecast for 2026-27 to 6.4 per cent, from an earlier estimate of 6.2 per cent.
Economy shows resilience amid global challenges
The Economic Survey highlighted that India’s economy has remained stable despite global uncertainties. It noted that slower growth in key global markets and trade disruptions, particularly due to tariffs, could affect exports and investor confidence.
For the current financial year, the government has pegged growth at 7.4 per cent, higher than the 6.3-6.8 per cent range projected in last year’s survey. The Survey said India’s growth picked up even after facing sharp tariff hikes by the United States. “Although growth estimates were reduced after the US imposed a combined 50 per cent tariff on several Indian exports in 2025, actual performance exceeded expectations,” it noted. ALSO READ | Economic Survey 2025-26: India's growth outlook strong, focus on resilience
Economic Survey 2026: Fiscal deficit, capex trends
India’s fiscal deficit declined from 9.2 per cent of GDP in FY21 to 4.8 per cent in FY25 (Provisional Accounts) and is projected at 4.4 per cent for FY26. The revenue deficit as a proportion of GDP has steadily narrowed, reaching its lowest level since FY09. This has allowed more resources for capital expenditure, improving the quality of government spending.
Capital expenditure has increased steadily, rising from an average of 1.7 per cent of GDP before the Covid-19 pandemic to 4 per cent in FY25. Broader measures of effective capex, which include grants for creating capital assets, have similarly increased.
Global environment remains uncertain
The Economic Survey cautioned that the global economic environment remains unpredictable, shaped by geopolitical tensions, trade disruptions, and differing growth and inflation trends across major economies. While near-term global activity has shown resilience, underlying vulnerabilities persist, including fragmented supply chains, fiscal pressures and reliance on economic policy tools for strategic purposes.
Domestic demand drives growth in FY26
India has maintained strong growth momentum in FY26, with the First Advance Estimates projecting real GDP growth at 7.4 per cent.
The Economic Survey said, “Private consumption and capital formation continue to support expansion, while services remain the key contributor on the supply side. Manufacturing activity has strengthened, and agriculture has provided stability, notwithstanding structural constraints.”
Exports and external sector performance
Despite higher US tariffs, India’s merchandise exports grew 2.4 per cent during April-December 2025, while services exports rose 6.5 per cent. Total exports, including goods and services, reached a record $825.3 billion in FY25 and have continued to grow in FY26.
Merchandise imports increased by 5.9 per cent during the same period, but this was balanced by higher services trade surplus and robust remittances. As a result, the current account deficit remained moderate at 0.8 per cent of GDP in H1 FY26.
India’s external sector remains strong, with forex reserves covering over 11 months of imports as of January 16, 2026, and approximately 94 per cent of external debt outstanding as of September 2025, providing a healthy liquidity cushion.