The government’s annual stock-take paints a picture of a resilient Indian economy reaching a Goldilocks moment
Finance Minister Nirmala Sitharaman tabled the Economic Survey 2025-26 in Parliament, presenting a robust narrative of domestic strength amid a global backdrop of “managed disorder.” The document characterises India as an oasis of macroeconomic stability, forecasting a real GDP growth of 6.8 to 7.2 per cent for the upcoming 2026-27 fiscal year. This optimistic outlook is grounded in a rare convergence of over 7 per cent growth and a decade-low headline inflation rate of 1.7 per cent.
The Survey describes a “Paradox of 2025,” where India’s strongest macroeconomic performance in decades has collided with a global system that no longer rewards such success with capital inflows or currency stability. Despite these external headwinds, the Indian economy has maintained its position as the fastest-growing major economy for the fourth consecutive year. The government’s proactive structural reforms and digital infrastructure have successfully pushed India’s potential GDP growth rate to a solid 7 per cent.
The Goldilocks moment of high growth and low inflation
A central theme of the Economic Survey is achieving what economists call a “Goldilocks” state, an economy that is neither too hot to trigger high inflation nor too cold to stall growth. For the April to December 2025 period, headline inflation averaged just 1.7 per cent, driven largely by a contraction in vegetable and pulse prices. This price stability has provided the Reserve Bank of India with the necessary room to cut the repo rate by 125 basis points over the last calendar year.
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This stable environment has spurred private consumption, which now accounts for approximately 61.5 per cent of the GDP. Rising real purchasing power, aided by tax and GST relief, has ensured that domestic demand remains the primary engine of the economy. Investment activity also showed remarkable resilience, with Gross Fixed Capital Formation growing by 7.8 per cent, sustained by the central government’s massive capital expenditure, which hit 4 per cent of the GDP in the previous fiscal.
Navigating the paradox of global geopolitical headwinds
The Economic Survey offers a candid assessment of the external environment, noting that 2025 was an “unusually challenging year” due to trade uncertainties and high tariffs from major global powers. It highlights that the global system is shifting toward a less coordinated, more risk-averse world. In this scenario, trade is increasingly explicitly coercive, and supply chains are being realigned under political pressure rather than economic efficiency.
Despite these pressures, India’s external sector has demonstrated significant resilience. Foreign exchange reserves reached a historic high of 701.4 billion dollars in January 2026, providing a comfortable buffer that covers 11 months of imports. The Current Account Deficit moderated to 0.8 per cent of GDP in the first half of the fiscal year, and the country remains the world’s largest recipient of remittances, hitting 135.4 billion dollars in FY25.
Banking, health, and structural transformation in industry
The health of the Indian financial sector is at a multi-decade best, according to the latest data. Gross Non-Performing Assets of scheduled commercial banks dropped to 2.2 per cent by September 2025, while Net NPAs fell to a record 0.5 per cent. This balance sheet clean-up has enabled respectable credit growth, particularly to micro and small enterprises. The Survey notes that corporate balance sheets are now strong enough to support the next leg of the private investment cycle.
In the industrial sector, the Production-Linked Incentive schemes across 14 sectors have begun yielding tangible results. These schemes have attracted over 2 lakh crore rupees in actual investment and generated approximately 12.6 lakh jobs as of late 2025. The Survey also emphasises a “New Age” focus on Sovereign AI and clean energy, highlighting the launch of the National Nuclear Energy Mission with a 20,000 crore rupee allocation to help reach the long-term target of 100 GW capacity.
The Hinge Point
The 2025-26 Economic Survey marks the moment when India stops being a participant in the global order and starts aspiring to be its stabiliser. This is the hinge point because the document formally introduces the concept of “Strategic Indispensability”—the idea that India must build capabilities that the rest of the world depends upon to ensure its own security and growth. The story changes here because the government is no longer just defending its growth rate; it is acknowledging that the era of easy globalisation is over and that “Swadeshi” has become a legitimate policy instrument in a non-reciprocal trade world.
What can no longer remain the same is the expectation that macroeconomic excellence alone will attract foreign capital. By highlighting that the rupee is “punching below its weight” despite stellar fundamentals, the Survey admits that geopolitics now trumps economics in the global marketplace. This marks a definitive shift in Indian policy toward “Strategic Sobriety,” where the priority is now on creating resource buffers, diversifying payment routes, and hushing domestic vulnerabilities to survive a global system that is increasingly distrustful and disorderly.