Economic Survey: Indian Economy Expected To Grow At 7.4% In Financial Year 2025-26

India's economy is projected to grow 7.4% in FY26 and 6.8-7.2% in FY27, driven by regulatory reforms, a strong macroeconomic base, and a renewed call for private sector investment, according to the Economic Survey 2025-26.

The survey, tabled in Parliament by finance minister Nirmala Sitharaman and authored by chief economic adviser V. Anantha Nageswaran, outlines how India plans to navigate a turbulent global economy, including tighter US tariffs and uncertainty around AI-led growth.

For the current fiscal, the 7.4% forecast aligns with the IMF's 7.3% and World Bank's 7.2% projections. FY27 growth is expected to moderate slightly, with the two multilateral bodies estimating 6.4% and 6.5% respectively.

The report lays out recent reforms, such as GST and income tax relief, a simplified direct tax law set to launch in April, and overhauled FDI and bankruptcy norms. It also calls for greater private investment in infrastructure and job creation, amid growing technological disruption.

Citing IMF warnings of an "AI bubble" in its latest World Economic Outlook, the survey flags potential risks of a market correction that could slow capital flows and damage household wealth.

India's manufacturing roadmap focuses on global supply diversification, improved quality, and deeper trade partnerships. The country is also pushing for self-sufficiency in semiconductors and other critical sectors.

Inflation remains subdued. The Reserve Bank of India projects CPI inflation at 2% for the year, well below its 4% target, driven by food price corrections. Lower inflation has, however, weighed on nominal GDP, now estimated at 8%, short of the 10.1% budget target.

A new GDP series with a 2022–23 base year will inform the second advance estimate due February 27. Economists expect minimal impact on growth figures.

Public capital expenditure continues to rise sharply from Rs 5.93 trillion in FY22 to Rs 11.21 trillion in FY26, reaching 3.1% of GDP. But the survey stresses that sustained growth will need a pivot to private investment to meet India's 2047 development goals.