Economic Survey 2025-26: India's growth outlook strong, focus on resilience

CEA V Anantha Nageswaran said that inflation is largely contained, rainfall and agricultural prospects are supportive, external liabilities remain low, and banks are in good health

Chief Economic Adviser (CEA) V Anantha Nageswaran on Thursday released the Economic Survey for the financial year 2025–26, stating that India’s potential growth rate has risen to 7 per cent, up from 6.5 per cent three years ago.

Growth outlook remains strong

Authored by CEA Nageswaran, the survey said India’s growth momentum remains healthy, and the overall outlook is favourable. Inflation is largely contained, rainfall and agricultural prospects are supportive, external liabilities remain low, and banks are in good health. He added that liquidity conditions are comfortable, credit growth is respectable, corporate balance sheets are strong, and the overall flow of funds to the commercial sector remains robust.

 

Weak currency paradox

Despite strong macroeconomic fundamentals, the government flagged concerns over currency stability. “The paradox of 2025 is that India’s strongest macroeconomic performance in decades has collided with a global system that no longer rewards macroeconomic success with currency stability, capital inflows, or strategic insulation,” the survey noted.

 

He noted that the Indian rupee underperformed in 2025 due to structural factors. India runs a trade deficit in goods, and while it earns a surplus through services exports and remittances, this is not enough to fully offset the gap.

Growth picked up despite US tariffs

Nageswaran said growth forecasts were initially revised downward after the US imposed tariffs of up to 50 per cent on certain Indian imports starting in August last year. However, growth eventually accelerated, driven by structural reforms and policy measures.

 

These included income tax cuts announced in the last Budget, a major overhaul of the Goods and Services Tax (GST), and progress on labour codes, which together helped support domestic demand and economic activity.

Govt lists three global scenarios for 2026

The CEA outlined three possible global scenarios for 2026. The first is a fragile continuation of 2025, where growth continues but uncertainty remains high, and even small shocks could trigger volatility, forcing governments to intervene frequently.

 

The second scenario is a disorderly multipolar world marked by intensified geopolitical rivalry, coercive trade policies, broken supply chains and rising cross-border financial stress.

 

The third, lower-probability scenario involves a systemic shock, where financial, technological and geopolitical pressures combine, potentially causing severe disruption to global capital flows and economic stability.

India better placed, but not insulated

Nageswaran said India is relatively better positioned than many other countries in all three scenarios due to its strong macroeconomic fundamentals. However, he cautioned that this does not mean the country is fully insulated from global shocks.

 

A common risk across all scenarios, he said, is disruption to capital flows and the resulting impact on the rupee. “India needs to generate sufficient investor interest and export earnings in foreign currency to cover its rising import bill. Rising incomes invariably lead to higher imports, and this has been the historical global experience,” he said.

Focus on resilience, not quick fixes

Calling for a long-term approach, the CEA said economic policy must focus on ensuring supply stability, building resource buffers, and diversifying trade routes and payment systems.

 

He added that as the global environment is reshaped by geopolitical changes that will affect investment and supply chains for years, India should prioritise resilience, continuous innovation, and long-term discipline instead of seeking short-term solutions, as it moves towards the goal of Viksit Bharat.