New Delhi, Jan 30: India is transitioning into a phase of high-growth and macroeconomic resilience, supported by stable fundamentals, broad-based sectoral performance, and coordinated fiscal and monetary policies, according to the Economic Survey 2025–26, released by the Ministry of Finance on Thursday.
The Survey projects real GDP growth for FY27 in the range of 6.8 to 7.2 per cent, underpinned by strong domestic demand, historically low inflation, improved labour market indicators, and strengthened external and financial buffers. It highlights India’s ability to sustain momentum despite a challenging global economic environment.
Strong Macroeconomic Fundamentals and Growth Outlook
As per the First Advance Estimates, India’s real GDP and Gross Value Added (GVA) are projected to grow by 7.4 per cent and 7.3 per cent respectively in FY26. Agricultural performance has supported rural incomes and consumption, while improvements in urban demand—assisted by tax rationalisation measures—have broadened the consumption base. India’s potential growth is estimated at around 7 per cent, reflecting sustained medium-term capacity.
The Survey notes that coordinated fiscal, monetary, and structural reforms have reinforced macroeconomic stability while supporting investment, consumption, and inclusion.
Inflation at Historic Lows, Monetary Conditions Supportive
India recorded its lowest inflation since the inception of the CPI series, with average headline inflation at 1.7 per cent during April–December 2025, driven by easing food and fuel prices. Among Emerging Markets and Developing Economies, India saw one of the steepest declines in inflation in 2025 compared to 2024.
In December 2025, the Reserve Bank of India (RBI) revised its inflation forecast for FY26 downward from 2.6 per cent to 2.0 per cent, supported by a good kharif harvest and healthy rabi sowing. The IMF projects inflation at 2.8 per cent in FY26 and 4.0 per cent in FY27, while RBI’s projections for Q1 and Q2 of FY27 stand at 3.9 per cent and 4.0 per cent, respectively.
The RBI’s Monetary Policy Committee reduced the repo rate cumulatively by 100 basis points between April and December 2025, bringing it down to 5.25 per cent, complemented by a 100 basis point cut in the Cash Reserve Ratio to 3.0 per cent. Liquidity injections through open market operations and USD-INR swaps ensured surplus system liquidity averaging ₹1.89 lakh crore in FY26 up to January 8, 2026.
Sectoral Drivers: Agriculture, Industry, and Services
Agriculture and allied activities continued to stabilise rural demand, with the sector estimated to grow by 3.1 per cent in FY26. Agricultural GVA expanded by 3.6 per cent in H1 FY26, aided by a favourable monsoon, while allied activities such as livestock and fisheries grew steadily at 5–6 per cent.
Industrial activity gathered momentum, with the industrial sector projected to grow by 6.2 per cent in FY26, up from 5.9 per cent in FY25. Manufacturing emerged as a key growth engine, with GVA growth accelerating to 7.72 per cent in Q1 and 9.13 per cent in Q2 of FY26. Production Linked Incentive (PLI) schemes across 14 sectors attracted over ₹2 lakh crore in actual investments, generated incremental production exceeding ₹18.7 lakh crore, and created over 12.6 lakh jobs as of September 2025. India’s Global Innovation Index ranking improved to 38th in 2025, up from 66th in 2019.
The services sector remained the dominant contributor, growing an estimated 9.1 per cent in FY26, compared to 7.2 per cent in FY25. Services’ share in GDP rose to 53.6 per cent in H1 FY26, with GVA share reaching a historic 56.4 per cent. India became the world’s seventh-largest services exporter, with its global share rising to 4.3 per cent in 2024.
Employment and Labour Market Trends
India’s labour market showed resilience alongside economic expansion. Total employment stood at 56.2 crore persons in Q2 FY26, reflecting the creation of approximately 8.7 lakh jobs over the previous quarter. The Labour Force Participation Rate rose to 56.1 per cent, female LFPR increased to 35.3 per cent, the Worker Population Ratio climbed to 53.4 per cent, and the unemployment rate declined to 4.8 per cent in December 2025.
Organised manufacturing employment rose by 6 per cent year-on-year in FY24, adding over 10 lakh jobs, while the e-Shram portal registered over 31 crore unorganised workers, with women accounting for more than 54 per cent. The National Career Service platform recorded over 5.9 crore job seekers, 53 lakh job providers, and mobilised around 8 crore vacancies, marking over 200 per cent growth in FY24 compared to FY23.
Trade, External Sector, and Buffers
India’s total exports reached record levels of USD 825.3 billion in FY25 and USD 418.5 billion in H1 FY26, led by services exports and non-petroleum merchandise. Services exports touched an all-time high of USD 387.5 billion in FY25, growing 13.6 per cent year-on-year.
Foreign exchange reserves stood at USD 701.4 billion as of January 16, 2026, providing an import cover of around 11 months and covering over 94 per cent of external debt. India remained the world’s largest recipient of remittances, with inflows of USD 135.4 billion in FY25.
Industrial Output and Core Sector Performance
Industrial activity strengthened further in December 2025, with the Index of Industrial Production (IIP) rising by 7.8 per cent, the highest in over two years. Manufacturing grew by 8.1 per cent, while mining and electricity expanded by 6.8 per cent and 6.3 per cent, respectively. Core industries such as cement and steel recorded growth of 13.5 per cent and 6.9 per cent, reflecting sustained infrastructure demand.
Fiscal Consolidation and Financial System Strength
The Survey highlights improved fiscal credibility, with three sovereign rating upgrades in 2025 by Morningstar DBRS, S&P Global Ratings, and R&I. The Centre’s revenue receipts rose to 9.2 per cent of GDP in FY25, supported by buoyant tax collections and expansion of the direct tax base, with income tax filings increasing to 9.2 crore.
Effective capital expenditure increased to 4 per cent of GDP in FY25, while states maintained capital spending at around 2.4 per cent of GDP under the Special Assistance to States for Capital Investment scheme. India reduced its general government debt-to-GDP ratio by 7.1 percentage points since 2020.
The banking sector recorded multi-decadal low NPAs, strong capital adequacy at 17.2 per cent, and improving profitability. Credit growth accelerated to 14.5 per cent year-on-year in December 2025, with MSME credit expanding by 21.8 per cent.
India’s Financial Inclusion Index improved from 64.2 in March 2024 to 67.0 in March 2025, while capital markets mobilised ₹10.7 lakh crore in FY26 up to December 2025. Household financial savings continued shifting towards market-linked instruments, with equity and mutual funds accounting for over 15.2 per cent of annual savings in FY25.
Outlook
The Economic Survey concludes that India’s economy in FY26 is characterised by stability alongside momentum, with broad-based growth, low inflation, strong external buffers, improving labour markets, fiscal consolidation, and a resilient financial system, positioning the country to sustain long-term growth while maintaining macroeconomic stability.
