Fundamentals strong: Economic Survey pegs GDP growth at 6.3-6.8% next fiscal

The economy is likely to grow at 6.3 to 6.8 per cent in 2025-26 on the back of strong macroeconomic fundamentals, although strategic and prudent policy management will be required to navigate global headwinds, said the Economic Survey tabled by Finance Minister Nirmala Sitharaman in Parliament on Friday.

Editorial: Sobering survey

However, the GDP growth rate is estimated to slip to four-year low of 6.4 per cent in the current financial year ending March 2025, close to its decadal average. The key pre-Budget document emphasised that the country needed to grow at 8 per cent for up to two decades to become a developed nation or “Viksit Bharat” by 2047.

Growth drivers

• Deregulation for growth of MSMEs
• Augmenting internal capacities
• Private sector to play key role
• Energy transition to cut costs
• Increase in rural demand

Challenges ahead

• Russia-Ukraine, Israel-Hamas wars
• Rising incidents of cybercrime
• Geopolitical risks around policies guiding global trade
• Increasing commodity prices
• Slow job creation, high power tariff

Globalisation thing of past

We will have to rely on domestic growth drivers as the era of globalisation, faster and larger movement of trade and goods and services is behind us. — V Anantha Nageswaran, Chief Economic Adviser

• Need to strictly regulate ultra-processed foods
• ‘Untapped’ potential in agri, policy shift a must

The survey displayed steady economic growth, despite global headwinds. According to it, the overall picture was encouraging. “The agriculture sector remains strong, consistently operating well above trend levels. The industrial sector has also found its footing above the pre-pandemic trajectory. The robust rate of growth in the recent years has taken the services sector close to its trend levels,” it said.

The survey cited strong domestic economic fundamentals, a declining unemployment rate, stable inflation and the need for further reforms to sustain growth momentum. “The fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption. On balance of these considerations, we expect that the growth in FY26 would be between 6.3 and 6.8 per cent,” the survey stated.

The survey stated that the manufacturing sector faced pressures due to weak global demand and domestic seasonal conditions. Also, private consumption remained stable, reflecting steady domestic demand. Fiscal discipline and strong external balance supported by a services trade surplus and healthy remittance growth contributed to macroeconomic stability. Together, these factors provided a solid foundation for growth amid external uncertainties.

The survey highlighted that looking ahead, the economic prospects for FY26 were balanced. Rural demand backed by a rebound in agricultural production, an anticipated easing of food inflation and a stable macro-economic environment provided an upside to near-term growth. Overall, India would need to improve its global competitiveness through grassroots level structural reforms and deregulation to reinforce its medium-term growth potential.

Headwinds to growth include elevated geopolitical and trade uncertainties and possible commodity price shocks. Domestically, the translation of order books of private capital goods sector into sustained investment pick-up, improvements in consumer confidence, and corporate wage pick-up would be key to promoting growth.

Briefing the media, Chief Economic Adviser (CEA) V Anantha Nageswaran said the country would have to rely on domestic growth drivers for future growth, stating that globalisation might be a thing of past.

He mentioned that India was on a steady growth path, while globalisation was slowing down. “This change brings both challenges and new opportunities. To keep growing, India must focus on economic reforms and take advantage of its young workforce,” he said, adding that India had to “raise its game” of domestic growth as the global context and contours for growth had changed.