India’s economy continues to show resilience, with the Economic Survey estimating GDP growth at 7.4% in FY26, reaffirming the country’s position as the fastest-growing major economy for the fourth consecutive year. Growth for FY27 is projected between 6.8% and 7.2%, reflecting a stable medium-term outlook even as global uncertainties persist. India’s long-term potential growth rate is assessed at around 7%, supported by strong domestic fundamentals.
The Survey highlights that growth is being powered by a “double engine” of consumption and investment. Private household spending has strengthened, with private final consumption expenditure rising to 61.5% of GDP. This increase is attributed to low inflation, stable employment, tax rationalisation, and improved rural demand following favourable agricultural performance. At the same time, investment activity remains robust, with gross fixed capital formation accounting for 30% of GDP, indicating continued expansion in productive capacity.
Sectoral performance shows a broad-based expansion. Agriculture and allied sectors are expected to grow 3.1%, supported by a favourable monsoon. Growth in livestock and fisheries continues to provide stability, reducing reliance on volatile crop output. The industrial sector is gaining traction, with manufacturing expanding 8.4% in the first half of FY26, while construction activity remains strong due to sustained infrastructure spending. The services sector continues as the primary growth driver, recording over 9% growth, though trade and hospitality remain slightly below pre-pandemic averages.
Inflationary pressures have eased significantly. Headline consumer inflation fell to 1.7%, largely due to lower food prices, particularly vegetables and pulses. Core inflation remains stable, and the overall outlook is considered comfortable due to favourable supply conditions and tax reforms. Lower inflation has helped improve real purchasing power, supporting consumption demand.
Policy support has played a central role in sustaining momentum. The government has maintained fiscal discipline while prioritising capital expenditure. Tax collections remain resilient, and spending has increasingly focused on infrastructure development. Market confidence is reflected in lower sovereign bond yields and credit rating upgrades. On the monetary front, the policy repo rate has been reduced by 125 basis points, alongside liquidity injections, lowering borrowing costs. The banking sector’s health has improved, with gross NPAs declining to 2.2%, a multi-decade low.
On the external front, India’s total exports reached a record USD 825.3 billion, supported by strong services exports and remittances. The current account deficit remains moderate at 0.8% of GDP, while foreign exchange reserves cover over 11 months of imports, providing a cushion against volatility. Trade agreements with multiple partners, including a significant free trade agreement with the European Union, are expected to support future export growth.
Reforms such as Labour Codes implementation, GST rationalisation, and deregulation measures aim to strengthen the business environment. While global trade tensions and geopolitical risks persist, the Survey underscores that domestic demand, stable inflation, strong banks, and sustained public investment provide a solid foundation for continued growth.
Overall, the Economic Survey presents an outlook of steady, demand-led growth, with India positioned to navigate global challenges while maintaining macroeconomic stability.
