Economic Survey 2025-26: Comprehensive Analysis for UPSC Preparation
Finance Minister Nirmala Sitharaman presented the Economic Survey 2025-26 in Parliament on January 30, 2026, setting the stage for India's first Sunday Budget scheduled for February 1. This crucial document, prepared under the guidance of Chief Economic Advisor V. Anantha Nageswaran, offers vital insights for UPSC aspirants and economic observers alike.
State of the Economy: Growth Projections and Consumption Trends
The Survey projects India's economic growth between 6.8-7.2% for the upcoming financial year, representing a slight moderation from the current fiscal year's 7.4% projection. Notably, the government has revised the economy's potential growth rate upward to 7% from 6.5% three years ago. A significant highlight is the Private Final Consumption Expenditure, which grew by 7.0% in FY26, reaching 61.5% of GDP—the highest level since 2012.
External Sector Performance and Trade Strategy
India's total exports reached USD 825.3 billion in FY25, marking a 6.1% year-on-year growth. This expansion was primarily driven by robust services exports, which stood at USD 387.6 billion. The Survey notes that India's expanding network of Free Trade Agreements provides reliable market access amid global uncertainties, while the Current Account Deficit remains modest due to strong services exports and remittances.
Agriculture: Challenges and Reform Imperatives
Despite contributing nearly one-fifth of national income and employing 46.1% of the workforce, India's agriculture sector faces significant sustainability and productivity challenges. The Survey calls for comprehensive reforms including:
- Overhauling the fertilizer sector
- Boosting research and development investments
- Strengthening irrigation infrastructure
- Promoting crop diversification
Climate Finance and Environmental Concerns
The Survey highlights a critical gap in climate finance, noting that while global capital markets are flush with funds, very little is directed toward climate action. Developing countries (excluding China) receive only about 15% of international climate finance. Domestically, financial resources remain insufficient for India's green transition investment requirements.
Health and Education: Strategic Shifts
India's health policy is undergoing a strategic shift from treatment-centric approaches to preventive healthcare models, recognizing that long-term economic productivity depends on healthier human capital. The Survey flags concerns about digital addiction and screen-related mental health issues among children and adolescents.
In education, while India has achieved near-universal enrolment at the school level, the Survey cautions that gains haven't uniformly translated into learning outcomes. The secondary age-specific net enrolment rate remains low at 52.2%, highlighting the need to retain students beyond Class 8.
Artificial Intelligence: Guarded Development Approach
The Survey advocates for a carefully sequenced AI strategy for India, emphasizing coordination first, capacity building next, and binding policy leverage last. This approach aims to avoid premature regulatory lock-ins while allowing institutions and markets to co-evolve amid global uncertainties.
Inflation Trends and Global Scenarios
Retail inflation (CPI) has moderated to 1.7% in 2025-26, driven primarily by declining food prices. However, some firming is expected going forward. The Survey outlines three possible global scenarios for 2026:
- 'Business as in 2025' continuation
- Disorderly multipolar breakdown
- Systemic shock cascade where financial, technological, and geopolitical stresses amplify each other
Common risks for India across these scenarios include disruption of capital flows and consequent impact on the rupee.
Swadeshi Strategy and Corporate Culture
The Survey describes Swadeshi as "inevitable and necessary" in a global trading environment marked by export controls, technology denial regimes, and carbon border mechanisms. It notes that Indian corporates show relative "lack of appetite" for long-term risk absorption and global competitiveness, calling for transformation in corporate culture.
Fiscal Concerns and Recommendations
Key fiscal concerns highlighted include:
- Risks of fiscal populism
- Crowding out of capital expenditure by cash transfers
- Rising revenue deficits in states (revenue surplus states decreased from 19 in FY19 to 11 in FY25)
The Survey recommends building liquidity and external capital buffers, proactive reforms to attract foreign investment, and generating sufficient export earnings in foreign currency to cover rising import bills.
About the Economic Survey
The Economic Survey, first presented for 1950-51, provides a detailed report of the national economy's state. While the government isn't constitutionally bound to present it or follow its recommendations, the document holds significant analytical value for policymakers and exam aspirants alike.
