The Economic Survey 2026, considered the blueprint for the country’s economic health before the Union Budget, was presented in Parliament today. According to the report, India is now expecting a real economic growth rate of more than 7 percent for the entire financial year, while the growth rate is expected to remain around 7 percent for another year after this. This indicates that the country’s economic momentum remains strong despite global uncertainties.
Expectations and reality of 2025
While the year 2025 started with new expectations for the world and India, many major changes were seen in the global and domestic circumstances during the year. Despite this, India’s strong macroeconomic performance continued in the post-Covid era. Even amid global uncertainties, the Indian economy showed signs of stability and confidence.
Economic pace remained fast in the beginning of the year
India’s economic growth remained strong in the first quarter of 2025 and further accelerated in the subsequent two quarters. During this period, the central bank aggressively cut interest rates to support economic activity and ease liquidity conditions in the market. In view of the changed economic circumstances, the macro-prudential measures implemented in 2023 were also relaxed.
Tax relief and fiscal discipline in the budget
The government gave big tax relief to domestic consumers in the FY 2026 budget presented in February, which boosted demand. Along with this, the government also performed better on the fiscal front in the financial year 2025. During this period, fiscal deficit remained limited to 4.8 percent of GDP, which was less than the budget estimate of 4.9 percent. The government set a target of reducing the deficit to 4.4 per cent for FY26, which is a significant step towards the promise made in 2021 of reducing the deficit to more than half from 9.2 per cent in FY21.
Increase in India’s credibility on the global stage
India’s economic strength was also appreciated at the international level. The country received rating upgrades from the three major credit rating agencies during the year 2025. Morningstar DBRS in May, S&P in August and R&I in September upgraded India’s sovereign ratings. Notably, S&P’s upgradation of India’s rating from BBB- to BBB was the first upgrade by a major global agency in nearly two decades.
Economy strong, but rupee devaluation a matter of concern
The survey report says that India’s economy is growing strongly in 2025. The growth rate remains strong, the economic outlook is favourable, inflation is under control and prospects for rainfall and agriculture are also favourable. The country’s external liabilities are low, the banking sector is healthy, liquidity is adequate and credit growth is satisfactory. Corporate balance sheets are strong and capital flows into the commercial sector remain strong. Proactivity in policy-making and purposeful governance are further strengthening this economic outlook. However, the current valuation of the rupee does not fully reflect India’s strong economic fundamentals. In other words, the real value of the rupee is not in line with its economic strength. This provides some relief at present, as the depreciating rupee partially offsets the impact of US tariffs and the risk of inflationary pressure from expensive crude oil imports is currently low. Still, the rupee’s devaluation is making some investors cautious. Experts say that there is a need to pay attention to the hesitation of investors regarding investment in India, so that the flow of capital remains smooth despite the strong economic structure of the country.
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