Growth potential revised upward. |
New Delhi: The Economic Survey for 2025-26, tabled in Parliament on Friday, has raised India’s potential growth rate to 7.0 percent, compared with 6.5 percent estimated three years ago. The Survey said this improvement reflects the impact of sustained domestic reforms and higher public investment, even as the global economy faces several challenges.
The Survey noted that India’s underlying growth capacity is improving steadily, supported by better infrastructure, stable policies, and strong focus on long-term development.
Infrastructure boosting efficiency
According to the Survey, major infrastructure expansion is playing a key role in lifting economic growth. It highlighted that the airport network has doubled over the past decade, improving connectivity across the country. At the same time, freight movement through inland waterways has grown rapidly, helping reduce transport costs and improve logistics.
These developments are easing supply bottlenecks, making it easier and cheaper for businesses to move goods. As a result, overall productivity and efficiency across sectors are improving.
Inflation trends show stronger supply side
The Survey said that while headline inflation still shows ups and downs due to food prices, core inflation remains subdued. Core inflation excludes volatile items such as gold and silver and reflects the underlying price trend in the economy.
Lower core inflation indicates that supply-side conditions are improving. Better logistics, stronger production capacity, and smoother supply chains are helping control price pressures over the medium term.
Support for small businesses
The Survey also highlighted the role of state-level reforms in supporting economic growth. Many states have eased regulations, making it easier for small and medium enterprises (SMEs) to operate and expand.
These reforms are helping smaller businesses become part of formal value chains, which improves productivity, creates jobs, and strengthens the economy’s medium-term growth potential.
Fiscal discipline supports stability
The Survey noted that the Central government’s predictable fiscal policy over the years has helped maintain macroeconomic stability. The government has balanced the need for growth with fiscal discipline.
It recalled that in the Union Budget for FY22, the Centre set a medium-term target to bring the fiscal deficit below 4.5 percent of GDP by FY26, instead of strict annual targets. This approach allowed the government to continue spending on capital expenditure, especially on infrastructure, without harming long-term fiscal health.
Global risks and India’s path
The Survey said the global environment is changing due to geopolitical tensions, which will affect trade, investments, and supply chains. However, Chief Economic Adviser V. Anantha Nageswaran said India should focus on building resilience and long-term strength rather than short-term solutions.
He added that the evidence in the Survey shows India is on the right path towards becoming a developed economy.
