Economic Survey 2025-26 Outlines Key Reform Measures for Upcoming Union Budget
Finance Minister Nirmala Sitharaman tabled the Economic Survey 2025-26 in the Rajya Sabha on Thursday, presenting a comprehensive roadmap for India's economic growth. The document emphasizes strategic resilience and continuous ascent within global value chains as essential for achieving developed nation status.
PSU Stake Sale Recommendations for Enhanced Disinvestment
The Survey proposes significant changes to public sector undertaking (PSU) disinvestment policies. It suggests amending the definition of a 'government company' under the Companies Act to allow minimum government shareholding in listed central PSUs to be reduced from 51% to 26%. This adjustment would facilitate deeper disinvestment while maintaining effective control, as approximately 26% stake is sufficient for special resolution rights.
The rationale behind this recommendation stems from the current limitation where the 51% minimum requirement restricts further disinvestment in about 30% of listed Central PSUs where government stake is already below 60%. The Survey presents two approaches: either amend the legal definition to maintain government company status with 26% ownership, or proceed with phased offer for sale (OFS) below 51% toward eventual privatization without changing definitions.
Manufacturing Competitiveness Through Duty Structure Correction
Another critical recommendation focuses on correcting inverted duty structures to enhance manufacturing competitiveness. The Survey highlights that higher import tariffs on intermediates and capital goods relative to final products raise input costs for domestic manufacturers, discouraging assembly and component manufacturing.
While acknowledging recent Budget corrections in various core manufacturing sectors, the document calls for continued calibration of tariffs on intermediates and capital goods, particularly in high-growth sectors. This approach aims to enhance cost competitiveness, deepen assembly and component ecosystems, and support India's emergence as a preferred global production base.
Comprehensive Reform Pillars for Industrial Growth
The Survey identifies five critical pillars for positioning industry as a key growth engine:
- Ease of doing business improvements
- Enhanced research and development (R&D) and innovation
- Comprehensive skilling initiatives
- Infrastructure and logistics development
- Scaling up of micro, small, and medium enterprises (MSMEs)
Quality Control Orders and Foreign Investment Strategies
Regarding Quality Control Orders (QCOs), the Survey advocates for a more pragmatic approach grounded in economic practicality. It cautions that regulations applied without comprehensive value-chain analysis can trigger cascading consequences, increasing costs and eroding competitiveness.
For foreign direct investment (FDI), the document recommends proactive steps to attract more inflows, particularly for infrastructure needs. It suggests creating a task force to engage top global companies and promote India's advantages including political stability, macroeconomic strength, sustained growth, and market size.
Strengthening Long-Term Finance Mechanisms
The Survey emphasizes the need to deepen long-term finance, noting that India's corporate bond markets remain shallow and illiquid, dominated by top-rated issuers. It recommends a coordinated agenda including:
- Rationalizing tax treatment of debt instruments
- Creating credit enhancement facilities for lower-rated issuers
- Standardizing securitization structures and disclosures
- Building municipal financial capacity and pooled bond mechanisms
- Revising investment guidelines for long-term funds
These reforms would supply the scale and maturity needed for infrastructure and climate financing while lowering the economy's overall cost of capital. The Survey underscores that sustained reforms across these areas are critical for India's strategic self-reliance and global integration.
