Economic Survey 2025–26 and the State of Indian Economy

Background of the Economic Survey

Economic Survey 2025–26 and the State of Indian Economy: The Union Ministry of Finance tabled the Economic Survey 2025–26 in Parliament on 30 January 2026. The Survey provides a comprehensive assessment of the Indian economy at a time of heightened global uncertainty.

It highlights the impact of geopolitical tensions, trade disruptions, and uneven growth and inflation trends across major economies. Despite global headwinds, India’s macroeconomic fundamentals are projected to remain resilient.

Static GK fact: The Economic Survey is traditionally presented one day before the Union Budget.

Overall Growth Performance

India continued its position as the fastest-growing major economy globally. The First Advance Estimates placed FY26 real GDP growth at 7.4%, while Gross Value Added (GVA) growth stood at 7.3%.

Growth momentum remained broad-based and was largely supported by domestic demand. This trend indicates reduced dependence on external demand during periods of global slowdown.

Static GK Tip: GVA measures the value added by all sectors excluding taxes and subsidies.

Sectoral Growth Trends

On the supply side, the services sector emerged as the primary growth driver. It was estimated to grow at 9.1% during the fiscal year, supported by trade, transport, finance, and digital services.

Industry and agriculture showed steady but comparatively moderate performance. The dominance of services underlines India’s structural shift towards a service-led economy.

Static GK fact: India’s services sector contributes over half of total GVA.

Demand-Side Dynamics

On the demand side, domestic consumption remained the backbone of economic expansion. Private Final Consumption Expenditure (PFCE) reached 61.5% of GDP, the highest level since 2012.

This reflects rising household spending, improved employment conditions, and stable rural demand. Strong consumption cushioned the economy against external shocks.

Investment and Capital Formation

Investment activity showed healthy expansion during FY26. Gross Fixed Capital Formation (GFCF) grew by 7.8%, with its share steady at 30% of GDP.

Public infrastructure spending and private sector confidence supported capital formation. Sustained investment levels are critical for medium-term growth and job creation.

Static GK Tip: GFCF includes expenditure on assets such as roads, factories, and machinery.

Fiscal Position of States

The Survey flagged growing pressure on State government finances. The combined fiscal deficit of States rose to 3.2% of GDP in FY25, compared to around 2.8% in the post-pandemic years.

Higher welfare spending and interest payments contributed to this increase. The Survey stressed the need for prudent fiscal management at the sub-national level.

Government Debt Trends

India achieved notable progress in managing public debt. The general government debt-to-GDP ratio declined by about 7.1 percentage points since 2020.

This improvement reflects higher nominal GDP growth and calibrated fiscal consolidation. Lower debt enhances long-term macroeconomic stability.

External Sector Performance

India remained the world’s largest recipient of remittances in FY25. Remittance inflows reached USD 135.4 billion, strengthening external stability.

Foreign exchange reserves increased to USD 701.4 billion by mid-January. Strong reserves provided a buffer against global financial volatility.

Static GK fact: India’s forex reserves are managed by the Reserve Bank of India.

Static Usthadian Current Affairs Table

Economic Survey 2025–26 and the State of Indian Economy: