India’s economic growth is expected to remain resilient into FY27, underpinned by strong domestic fundamentals, stable inflation and continued policy momentum, even as global conditions grow more uncertain, the Economic Survey 2025-26 has said.
The assessment comes at a time when the global economy is grappling with rising geopolitical tensions, trade policy disruptions and financial vulnerabilities, particularly linked to leveraged investments in technology and artificial intelligence. Despite these headwinds, the Survey argues that India is relatively well insulated compared to many major economies.
Growth Outlook: Momentum Expected To Carry Forward
According to the Economic Survey, India’s potential growth rate is now estimated at 7 per cent, an upward revision from the 6.5 per cent level assessed three years ago. This improvement reflects the cumulative impact of structural reforms, higher public capital expenditure, better logistics infrastructure and strengthening supply-side efficiencies.
“The economy retains momentum and growth is likely to be sustained into FY27,” the Survey observed, pointing out that India’s large domestic market, credible macroeconomic framework and limited external vulnerabilities continue to act as powerful stabilisers.
The Survey added that these factors place India in a stronger position than most global peers as the world enters a phase of uneven and fragile recovery.
India well placed amid tariff shocks, global fragmentation: Economic Survey
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A Fragile Global Backdrop
Globally, the Survey described the current phase as one of “fragile and diverging growth”. It highlighted intensifying geopolitical competition, trade uncertainty and financial risks emerging from heavily leveraged investments in emerging technologies.
Global trade, it noted, is increasingly being shaped by security and political considerations rather than pure economic efficiency. Tariffs, sanctions and supply-chain reconfiguration are becoming more common as countries prioritise resilience over cost optimisation.
Looking ahead to 2026, the Survey outlined three possible global scenarios, ranging from a period of managed disorder to a more severe multipolar breakdown. It also warned of a small but meaningful risk of a systemic global shock.
Strong Macroeconomic Buffers
Against this uncertain global backdrop, the Survey underscored the strength of India’s macroeconomic buffers. It pointed to healthy banking sector balance sheets, adequate system liquidity, steady credit growth and low external liabilities as key strengths.
Foreign exchange reserves, it said, remain comfortable and provide an additional cushion against external volatility. These factors together enhance India’s capacity to absorb shocks arising from global financial disruptions.
Currency And Capital Flow Risks
The Survey, however, cautioned that geopolitical turbulence could increasingly influence capital flows and currency markets. In a world marked by persistent uncertainty, disruptions to global capital movement may become a structural feature rather than a temporary phenomenon.
“The rupee’s valuation does not accurately reflect India’s economic fundamentals,” the Survey observed. While an undervalued currency offers some export competitiveness, prolonged volatility could prompt investors to exercise caution.
Policy Credibility As A Strategic Asset
To navigate these challenges, the Survey stressed the importance of policy credibility, predictability and administrative discipline, describing them as “strategic assets” in the evolving global order.
It emphasised that India must pursue growth maximisation while simultaneously strengthening shock-absorption capacity—a task likened to “running a marathon and a sprint at the same time”. This would require building economic buffers, ensuring supply stability, diversifying trade routes and enhancing domestic manufacturing competitiveness.
The Survey reiterated the central role of structural reforms, deregulation and an “entrepreneurial state” capable of swift and decisive action under uncertainty.
Despite mounting global risks, the Survey struck an optimistic note. Sustained reforms, resilient domestic demand and improving deregulation at the state level are steadily raising India’s medium-term growth potential.
“In an uncertain and contested world, India’s growth story remains intact,” the Survey said, while underlining that adaptability, resilience and long-term policy commitment will be crucial as the country advances towards its goal of becoming a developed economy.
