The Economic Survey

Every year, a few days before the Union Budget, the finance minister releases another document that quietly sets the tone for everything that follows — the Economic Survey.

Think of it as the government’s annual report card. It’s the closest thing India has to an audit of its economy, covering everything from growth and inflation to fiscal health, trade deficits, and the risks lurking beneath the surface.

Facts and figures

Facts and figures

Growth of the economy – Last year the Economic Survey, estimated that our economy would grow at around 6.3% to 6.8% in FY26. Now despite tariffs and uncertainties or where the world economy was going, we held up strong with a solid 7% growth. That’s significantly higher than advanced economies like the US and Europe, which are growing at around 2%, higher than the average growth of developing economies at about 4%, and well above the global average of roughly 3%. That means that on paper, India’s growth looks remarkably strong, making it the fastest-growing major economy for the fourth year in a row, even as global trade slowed and tariff risks mounted.

  1. Private consumption now accounts for 61.5% of GDP, the highest share since FY12 driving GDP growth.
  2. Capital spending, which includes investments in machinery, factories, roads, and infrastructure, accounts for about 30% of GDP and has grown faster than both last year and the pre-pandemic average.
  3. In FY25, India sold a record $825 billion worth of goods and services to the rest of the world - Even though the US raised tariffs, India’s goods exports still grew by 2.4%, while services like IT, business services, and travel grew faster at 6.5%. At the same time, India bought more from abroad, with imports rising by 5.9%, which means the gap between what we buy and what we sell in goods widened. But this isn’t a big worry because India earns a lot from services and from money sent home by Indians working overseas. These inflows help balance things out.
  4. 4. India recorded a balance of payments deficit of $6.4 billion in the first half of FY26, compared to a surplus the year before, and this gap was funded by dipping into foreign exchange reserves.
  5. Investors see lending to India as slightly riskier, so they ask for a higher interest rate - even though India’s credit rating is similar to countries like Indonesia, investors still demand a higher return. India’s 10-year government bond yield, for instance, essentially the interest rate the government has to pay when it borrows money for ten years, hovered around 6.7%, compared to about 6.3% for Indonesia.
  6. Why does India remain so dependent on foreign capital in the first place?

The answer lies in the structure of its exports. For years, services exports have quietly kept India stable. Since 2020, overall exports have grown at about 9.4% a year, with services growing faster than goods.

But the Survey argues that this model has limits. Services generate income, but they don’t reduce dependence on foreign capital in the way large-scale manufacturing does. Manufacturing forces countries to integrate deeply into global supply chains, earn foreign exchange at scale, and narrow their trade gaps sustainably. In FY25, even after accounting for services, India still ran a total trade deficit of $94.7 billion.

That’s why the Survey keeps pointing to East Asian economies, starting with Japan. Their experience shows how manufacturing-led exports can stabilise currencies, lower borrowing costs, and impose discipline across the economy. It also explains the Survey’s discomfort with protectionism. Shielding domestic firms behind tariffs may feel safe in the short term, but it raises costs, weakens export competitiveness, and keeps inefficient or ‘zombie firms’ alive.