Economic Survey Estimates GDP Growth At 7.4% For 2026, India To Stand Strong As Fastest Growing Major Economy

The Economic Survey has pegged India's FY26 GDP growth at 7.4%. India's medium-term growth potential is around 7%. The FY27 GDP growth is seen at 6.8-7.2%. 

The government's fiscal trajectory stands out amid elevated global debt, while the downside risks to global growth are prominent. The stability to global growth is fragile. GST rate cut changes will support demand and revenue resilience, according to the Eco Survey. 

The Survey frames FY27 as a year of adjustment, where firms and households recalibrate amid evolving global conditions. Despite international volatility, domestic demand and investment are expected to provide a steady foundation for economic activity.

• Projected GDP growth for FY27: 6.8–7.2%

• Medium-term potential growth: Around 7%, indicating structural resilience and an ability to maintain expansion despite external headwinds.

The document underscores that the outlook is cautiously optimistic rather than alarmist, signaling that policy interventions may be necessary if external conditions worsen, but overall momentum remains healthy.

Inflation and Monetary Environment

Retail inflation (CPI) dropped to 1.7% in FY25-26, largely due to a sharp decline in food prices, including vegetables, pulses, and spices. This low inflation, combined with falling borrowing costs, has bolstered purchasing power and domestic consumption.

Consumption and Domestic Demand

Consumption remains a key pillar of the economy. The Survey notes that low inflation, stable employment, and rising household purchasing power support sustained consumer spending. These factors, combined with an uptick in investment, are expected to cushion the economy against shocks from abroad.

External Stability

India’s external sector continues to be a stabilizing force:

• Adequate foreign exchange reserves and a manageable current account position have limited the impact of global market volatility.

• Foreign Portfolio Investments (FPIs) have shown fluctuations in FY26, shifting from net inflows to outflows in the second and third quarters, reflecting investor caution amid global uncertainties.

• Gold prices, which rose from roughly $2,600 to $4,300 per ounce in 2025, are highlighted as a signal of global risk sentiment and dollar weakness.

The Survey emphasizes that while these global indicators warrant careful monitoring, India’s macroeconomic fundamentals provide a cushion against external shocks.

Exports and Manufacturing

India’s export and manufacturing sectors have demonstrated remarkable growth:

• Electronics exports rose from the 7th-largest category in FY22 to the 3rd-largest by FY25, with FY26 data suggesting the sector may become the second-largest export category. In the first half of FY26 alone, electronics exports reached $22.2 billion.

• Mobile manufacturing has emerged as a flagship success story. Output jumped from ₹18,000 crore in FY15 to ₹5.45 lakh crore in FY25, an increase of nearly 30 times. India now hosts over 300 mobile factories, compared with just two in 2014, positioning it as the world’s second-largest mobile phone producer.

These trends reflect the impact of targeted industrial policies, including incentives under the Production Linked Incentive (PLI) scheme, which have boosted domestic manufacturing and exports while creating jobs.

Risk Areas

Despite positive indicators, the Survey identifies areas that need attention:

• Investor hesitation: Some foreign investors remain cautious about committing long-term capital to India.

• Global trade and geopolitical risks: Trade frictions, financial stress episodes, and international tensions could affect growth.

• Financial volatility: Sudden shifts in capital flows and currency fluctuations require vigilant macroeconomic management.