Eco Survey projects 6.8-7.2% economic growth in FY27, lays down strategic vision for India amid global uncertainty

Economic Survey 2026: The Indian economy is expected to expand at 6.8-7.2% in FY27, supported by strong macro fundamentals and a series of regulatory reforms, the Economic Survey 2025-26 said on Thursday, laying out a strategy to navigate a global economy roiled by upended trade tariffs.

Inflation remains benign thanks to supply side conditions and rationalisation of the goods and services tax (GST), the survey added.

Overall, the outlook is “one of steady growth amid global uncertainty, requiring caution, but not pessimism”.

Reforms in recent years appear to have lifted the economy's medium-term growth potential closer to 7%, the survey noted. “With domestic drivers playing a dominant role and macroeconomic stability well anchored, the balance of risks around growth remains broadly even. Taking these considerations together, the Economic Survey projects real GDP growth in FY27 in the range of 6.8-7.2%.”

“The outlook, therefore, is one of steady growth amid global uncertainty, requiring caution, but not pessimism,” it added.

The document, prepared by chief economic adviser V. Anantha Nageswaran and his team in the finance ministry, highlights reform measures undertaken in the current financial year, including income tax and GST relief, a new simplified direct tax law to take effect from April, and changes to foreign direct investment (FDI) and bankruptcy frameworks.

It also presents a roadmap for how India’s manufacturing sector can emerge stronger from current global trade pressures through diversification, improved product quality and deeper economic partnerships, while developing self-sufficiency in key areas such as semiconductors.

The survey’s FY27 growth projection comes on the back of a 7.4% expansion estimated for the current fiscal year in the first advance estimates released earlier this month. The International Monetary Fund (IMF) has projected 7.3% growth for India in the current fiscal, while the World Bank has pegged it at 7.2%. The two multilateral agencies expect the economy to grow 6.4% and 6.5%, respectively, in FY27, slightly more conservative than the projections by the Economic Survey.

The statistics ministry is scheduled release a second advance estimate for FY26 on 27 February, based on a new GDP series that shifts the base year from 2011-12 to 2022-23. While GDP base will change, economists expect minimal impact on growth rates.

Experts said that while real GDP growth rate of 7.4% is achievable for fiscal 2026, growth may moderate a bit in the next fiscal over the high base. “For FY27 or the medium term, what is sustainable would be a 6.5-7% real GDP growth,” said D K Srivastava, EY India’s chief policy advisor.

Inflation to stay benign

The survey pointed out that domestic inflation dynamics in FY26 (April-December) reflected a broad-based easing in price pressures, led by a sharp disinflation in food prices. Inflation, based on the Consumer Price Index (CPI) declined to 1.7%, driven primarily by a fall prices of vegetables and pulses, supported by favourable farm conditions, supply-side interventions, and a strong base effect.

The survey said that core inflation has exhibited persistence, largely influenced by price spikes in precious metals. Adjusting for these, underlying inflation pressures appear materially softer, indicating limited demand-side overheating, the survey said.

“Looking ahead, the inflation outlook remains benign, supported by favourable supply side conditions and the gradual pass-through of GST rate rationalisation. However, the trajectory of core inflation will need to be closely monitored in the context of monetary policy easing and potential upward pressures from global base metal prices."

Last month, the Reserve Bank of India (RBI) estimated CPI inflation at 2% for the year, below its 4% target, as food price corrections kept price pressures moderate. The central bank projected inflation of 0.6% for the December quarter and 2.9% for the March quarter.

Subdued inflation has weighed on nominal GDP growth which is measured at current prices and does not adjust for inflation. The first advance estimates pegged nominal GDP growth at 8% for the current fiscal year, below the budgeted assumption of 10.1%.

Srivastava said that in FY27, CPI-based inflation would be in the range of 3.3-3.5% and wholesale price index (WPI) based inflation may also inch up but stay below 2%. “Nominal GDP therefore may be in the range of 9-9.5% in FY27 although union budget may make a slightly higher assumption.”

Investment, job creation in an AI-led world

The annual critique of the economy prepared by the Department of Economic Affairs’ economic division serves as a broad policy compass and signals the government’s expectations from industry while offering suggestions that often extend beyond what may be politically possible in a given year.

In the 2016-17 Economic Survey, then chief economic adviser Arvind Subramanian proposed a universal basic income. In 2024, Nageswaran suggested that the private sector should take the lead on investment and that FDI from China could be viewed more favourably. In the 2024-25 Survey, he argued for further deregulation to revive growth engines.

The latest survey, tabled in Parliament by finance minister Nirmala Sitharaman, again calls on the private sector to scale up investment and prioritize job creation, at a time when technology and generative artificial intelligence (AI) are disrupting labour market.

Earlier this month, IMF warned of "re-evaluation of productivity growth expectations about AI,” in other words, an AI bubble, in its World Economic Outlook 2026. This, IMF cautioned, could lead to a decline in investment and trigger an abrupt financial market correction, spreading from AI-linked companies to other segments and eroding household wealth.

The survey said that India needs more private participation in building infrastructure, along with more data about investments and assets in the sector, instead of relying primarily on public expenditure as the country seeks to become a developed nation by 2047.

It said that India's push for infrastructure has led to an unprecedented increase in the government's capital expenditure (capex), while reducing the central government’s fiscal deficit as a share of nominal GDP. The Centre’s capex had increased substantially over the last few years.

Central capex has risen from ₹5.93 trillion in FY22 to ₹11.21 trillion in the FY26 budget estimates. As a share of GDP, capex support has increased from 2.5% in FY22 to 3.1% in FY26.

Medium term outlook

The survey called out how “heightened uncertainty in global trade and the imposition of high, penal tariffs created stress for manufacturers, particularly exporters, and affected business confidence”.

The next fiscal year is “expected to be a year of adjustment, as firms and households adapt to these changes, with domestic demand and investment gaining strength,” it added.

While the outlook for the global economy remains dim in the medium-term, downward-trending inflation across economies will result in monetary policies that support growth. This needs to be viewed in the context of whether productivity promised by artificial intelligence is delivered. If that fails, “it could trigger a correction in overly optimistic asset valuations, with the potential for broader financial contagion”.

These conditions manifest as external uncertainties for India rather than immediate macroeconomic pressures. Slower trade growth, tariffs, and capital volatility could, still, weigh on exports and investor sentiment. Ongoing trade talks with the US are expected to conclude during the year, “which could help reduce uncertainty on the external front”.

These factors stress the importance of adequate buffers and policy credibility.

“Against this backdrop, the domestic economy remains on a stable footing. Inflation has moderated to historically low levels, although some firming is expected to occur going forward. Balance sheets across households, firms and banks are healthier, and public investment continues to support activity. Consumption demand remains resilient and private investment intentions are improving. These conditions provide resilience against external shocks and support the continuation of growth momentum,” the survey noted.