Government’s Economic Survey expects India to grow at 6.3 to 6.8 per cent for 2025-26

The Economic Survey expects the government's emphasis on micro, small, and medium enterprises (MSMEs) and good rabi crop production to accelerate growth and employment in the economy

New Delhi: The Economic Survey tabled by Finance Minister Nirmala Sitharaman in Parliament on Friday pegs India’s real GDP growth in 2025-26 between 6.3 and 6.8 per cent, “keeping in mind the upsides and downsides to growth”.

The Survey expects the government’s emphasis on micro, small, and medium enterprises (MSMEs) and good rabi crop production to accelerate growth and employment in the economy.

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Looking ahead, India’s economic prospects for FY26 are balanced. Headwinds to growth include elevated geopolitical and trade uncertainties and possible commodity price shocks. Domestically, the translation of order books of the private capital goods sector into sustained investment pick-up, improvements in consumer confidence, and corporate wage pick-up will be key to promoting growth, the survey stated. Rural demand backed by a rebound in agricultural production, an anticipated easing of food inflation and a stable macro-economic environment provide an upside to near-term growth. Overall, India will need to improve its global competitiveness through grassroots-level structural reforms and deregulation to reinforce its medium-term growth potential, the survey pointed out. It also observes that inflation in the economy is under control, which will pave the way for a stable growth path.

“The government’s proactive policy interventions have been crucial in stabilising inflation. These measures include the strengthening of buffer stocks for essential food items, periodic open market releases and efforts to ease imports during supply shortages. Despite these challenges, there are positive signs for inflation management in India,” it said.

According to the survey, in 2024-25, private consumption remained stable, reflecting steady domestic demand. Fiscal discipline and strong external balance supported by a services trade surplus and healthy remittance growth contributed to macroeconomic stability. Together, these factors provided a solid foundation for sustained growth amid external uncertainties.

The government’s focus on empowering citizens through education, healthcare, skill development, and social infrastructure development has seen significant progress, according to the survey.

It highlights the rising trend in the government’s social services expenditure, as a percentage of total expenditure which has increased from 23.3 per cent in FY21 to 26.2 per cent in FY25 (BE) at a compound annual growth rate (CAGR). While the social services outlay of the Centre and State governments was Rs 14.8 lakh crore in FY21, it has increased steadily to stand at Rs 25.7 lakh crore in FY25.

The focus of reforms and economic policy must now be on systematic deregulation as the key agenda under Ease of Doing Business 2.0, suggests Chief Economic Advisor V. Anantha Nageswaran in the Economic Survey.

“Strategic and systematic deregulation can catalyse growth, innovation, and competitiveness and is critical to encourage innovation for the creation of a viable Mittelstand, i.e. India’s SME sector. With deregulation, India’s Mittelstand can help the States weather economic shocks, enable India to realise its manufacturing aspirations, attract long-term investments, and encourage growth which would be sustainable and ’employment-sensitive’.”

It suggests that adaptation becomes a priority for a country like India due to its higher vulnerability to climate change, the Economic Survey 2025 said. Developing countries such as India have to bear a disproportionate burden of climate change and have no choice but to face the climate change consequence of historical emissions. Hence, India needs to undertake climate adaptation on an urgent footing, it added.