Paradox of 2025: India’s strongest performance in decades has collided with...

The Economic Survey 2025-26 has pegged India’s real GDP growth for FY 2026-27 at 6.8-7.2%, stressing that the economy continues to exhibit resilience. Robust domestic demand has been identified as the main pillar of growth, especially at a time when global economic conditions remain uncertain.

"The paradox of 2025 is that India’s strongest macroeconomic performance in decades has collided with a global system that no longer rewards macroeconomic success with currency stability, capital inflows, or strategic insulation," the Economic Survey notes.


"Growth is good; the outlook remains favourable; inflation is contained; rainfall and agricultural prospects are supportive; external liabilities are low; banks are healthy; liquidity conditions are comfortable; credit growth is respectable; corporate balance sheets are strong; and the overall flow of funds to the commercial sector is robust," it adds.

"The global environment is being reshaped by geopolitical realignments that will influence investment, supply chains and growth prospects for years to come. Against today’s global churn, India must choose to build resilience, innovate relentlessly, and stay the course toward Viksit Bharat, rather than seek quick fixes to visible, short-term pressures," it cautions.

Striking an upbeat tone, the Economic Survey has pegged India’s potential growth rate at about 7 percent. This outlook reflects the economy’s medium-term strength, underpinned by ongoing reforms and a stable macroeconomic framework.

The Survey observed that although the global economic backdrop remains fragile, India’s prospects continue to be encouraging. It noted that growth in India has been more durable than in many peer economies, even as risks persist due to external uncertainties.

External sector stability was identified as a key area of strength, helping cushion the economy against global volatility. At the same time, the report cautioned that international shocks can have delayed effects, underscoring the need for continued policy vigilance.

The Economic Survey has been tabled days ahead of FM Sitharaman’s Budget speech which will be delivered on February 1, 2026.

India is the world’s fastest growing major economy, on the way to become the third largest in the coming years, as per International Monetary Fund (IMF’s) estimates.

The GDP growth has beaten government and Reserve Bank of India (RBI’s) estimates this financial year, hitting a six quarter high of 8.2% in the second quarter of FY 2025-26. Inflation on the other hand has been benign, dropping to below RBI’s target band of 2% to 6%. This has given the central bank room to cut repo rate and support growth. RBI has cumulatively cut repo rate by 125 basis points or 1.25% in calendar year 2025.

The growth push is important at a time when the global economy is facing headwinds and the trade war and geopolitical uncertainty unleashed by US President Donald Trump is making investors and governments around the world wary.

As per the first advanced estimates of GDP growth released by the National Statistics Office (NSO) earlier this month, India’s economy will grow at a robust 7.4% in the ongoing financial year 2025-26.