The numbers suggest an economy performing well, but not yet transformed; stabilised, but not de-risked; resilient on paper, but still dependent on forces beyond its control. In this sense, the Survey’s call for discipline risks becoming a substitute for a more uncomfortable debate about demand, distribution and structural acceleration.

The Survey’s upward revision of India’s potential growth rate to 7.0 per cent rests heavily on public capital expenditure, which has risen from 2.2 per cent of GDP in FY20 to about 3.3 per cent in FY25. This expansion has undeniably improved logistics, crowding in private investment in pockets such as roads, renewables and defence manufacturing.

Yet private fixed capital formation remains below its previous peak. According to the Survey’s own estimates, gross fixed capital formation stood at around 32.4 per cent of GDP in FY25—still short of the 34–35 per cent levels seen before the global financial crisis. Corporate balance sheets have healed, but private investment appetite remains selective and cautious.

This matters because sustained high growth cannot rely indefinitely on public investment alone. Without stronger, broad-based private capex, the economy risks settling into a public-investment-led plateau rather than a self-reinforcing investment cycle.

The Survey repeatedly warns against “short-term comfort” and populist consumption support. Yet its own data point to a consumption engine that is losing breadth. Private final consumption expenditure has grown more slowly than GDP over the past three years, with rural demand recovering unevenly and urban consumption increasingly concentrated among higher-income households.

Real rural wages, as cited in the Survey, have only modestly outpaced inflation in recent quarters, while informal employment continues to dominate non-farm job creation. Household savings, meanwhile, have shifted away from financial assets towards physical and precautionary holdings, reflecting uncertainty rather than confidence.

In this context, demand is not a moral hazard—it is a coordination problem. Weak consumption constrains capacity utilisation, which the Survey places at around 75 per cent in manufacturing, below levels that typically trigger large private investment cycles. Delayed gratification, when demand is already fragile, risks becoming delayed momentum.

The Survey is frank about India’s external constraint. Despite strong services exports and remittances, the merchandise trade deficit remains structurally large. In FY25, goods exports were approximately USD 440 billion, while imports crossed USD 710 billion, resulting in a merchandise deficit of around USD 270 billion.

Services exports, growing at a compounded annual rate of roughly 9–10 per cent since 2020, and remittances of over USD 125 billion, have softened the blow. Even so, the current account remains vulnerable to energy price shocks and capital flow reversals.

This vulnerability is not hypothetical. The Survey notes that the rupee underperformed in 2025 despite foreign exchange reserves exceeding USD 620 billion and external debt remaining below 20 per cent of GDP. The explanation it offers—that global capital no longer rewards macroeconomic discipline—is accurate, but incomplete.

If capital is volatile by nature, resilience cannot be built through restraint alone. It requires structural export diversification, scale manufacturing and—critically—domestic demand depth that reduces reliance on foreign savings.

The Survey rightly emphasises manufacturing as the anchor of long-term resilience. Yet its own data underline how far India still has to go. Manufacturing’s share in GDP has remained stubbornly flat at around 16–17 per cent for over a decade, far below the levels seen in East Asia during comparable stages of development.

Employment data reinforce the concern. Manufacturing employment has not expanded commensurately with output, with labour-intensive sectors such as textiles and leather struggling to regain momentum. MSMEs, which employ over 110 million people, continue to face high logistics costs, limited credit penetration and regulatory friction.

The Survey cautions against high tariffs and upstream protection, but stops short of confronting a deeper issue: India’s manufacturing strategy remains caught between scale and shelter. Without aggressive cost reduction, land and labour reform, and demand expansion, export competitiveness will remain episodic rather than systemic.

The Survey attributes India’s relatively high cost of capital to persistent current account deficits. India’s 10-year government bond yield, hovering around 6.7 per cent in FY25, remains higher than peers such as Indonesia and Thailand despite similar credit ratings.

But external deficits alone do not explain this premium. Domestic factors—fragmented financial intermediation, shallow corporate bond markets and uneven credit transmission—also matter. The Survey acknowledges these issues but treats them as secondary.

More importantly, reducing the cost of capital requires growth optimism that translates into risk-taking. Excessive emphasis on restraint can depress expectations, reinforcing the very risk premium policymakers seek to reduce.

The Survey highlights the Centre’s success in reducing the fiscal deficit from 9.2 per cent of GDP in FY21 to 4.8 per cent in FY25, with a target of 4.4 per cent in FY26. This consolidation has bolstered fiscal credibility and contributed to India’s recent credit rating upgrades.

However, its criticism of state-level fiscal behaviour deserves closer scrutiny. Several states have indeed expanded cash transfers and allowed revenue deficits to widen. But states also bear the brunt of social expenditure, urban infrastructure and employment schemes, often with constrained revenue autonomy.

General government debt remains around 82 per cent of GDP—high, but stable. Treating state populism as a primary risk while framing central restraint as virtue obscures the structural imbalance in India’s federal fiscal architecture.

The Survey celebrates rising formalisation, citing increased EPFO registrations and GST coverage. Yet it also acknowledges that informality continues to dominate employment, particularly in construction, services and small manufacturing.

Skill mismatches persist. Despite significant spending on skilling programmes, only a fraction of trained workers secure stable, well-paying jobs. Labour force participation among women, though improving, remains below 40 per cent—one of the lowest among major economies. Resilience that does not translate into upward mobility risks becoming stagnation with stability.

On climate, the Survey recognises rising adaptation costs but avoids quantifying their macroeconomic impact. Yet internal estimates suggest that climate-related disruptions could shave 2–4 percentage points off GDP by mid-century if unaddressed.

Urbanisation presents a similar blind spot. Cities generate over 60 per cent of GDP but lack fiscal autonomy and governance coherence. Municipal revenues remain below 1 per cent of GDP, constraining investment in housing, transport and resilience. These are not peripheral issues—they are growth constraints.

The Survey’s emphasis on resilience is understandable in a volatile world. But resilience is not a growth strategy. It is a baseline condition. India’s data tell a story of strength with fragility, stability with constraint. The challenge is not choosing between comfort and discipline, but between incrementalism and acceleration. Growth at 7 per cent offers a narrow window. Using that window requires ambition, demand creation and institutional risk-taking—not just endurance. The Economic Survey asks India to be patient. The numbers suggest India cannot afford to be passive. (IPA Service)