The Financial Survey 2025-26 has painted a comparatively rosy image of India’s home development outlook, elevating the nation’s medium-term outlook to 7% from its earlier estimate of 6.5%.
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Nonetheless, it has concurrently outlined a comparatively grim outlook for the worldwide economic system, estimating a 10-20% likelihood of a disaster worse than the worldwide monetary disaster of 2008 unfolding in 2026. Even its best-case state of affairs is a continuation of situations as they had been in 2025, however “more and more much less safe and extra fragile”.
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The Survey, authored by Chief Financial Advisor V. Anantha Nageswaran, tabled in Parliament by Finance Minister Nirmala Sitharaman, went on to say that every of its three probabilistic eventualities for the globe might pose dangers to India.
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For India, it pointed to the expansion of capital, improved labour participation, and larger effectivity within the deployment of those two elements of manufacturing as the important thing drivers of a better medium-term development outlook.
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Progress improve for India
For the present monetary yr 2025-26, the Survey highlighted the federal government’s estimate of seven.4% development, including that its ‘nowcast’ estimate for development in Q3 (October-December 2025) stood at 7%. For 2026-27, the Survey estimates a development price vary of 6.8-7.2%.
It famous that, in its 2022-23 version, it had estimated India’s medium-term development to be 6.5%, which might rise to 7-8% provided that sustained reforms had been carried out.
“Over the previous three years, reform momentum has strengthened throughout a number of areas related for medium-term development,” the Survey mentioned. “Manufacturing-oriented initiatives, such because the Manufacturing-Linked Incentive (PLI) schemes, FDI liberalisation, and logistics reforms, have supported capability creation.”
These measures, it added, had been additional bolstered by sustained public funding in bodily and digital infrastructure, the simplification of tax legal guidelines, measures focused at MSMEs which have sought to ease credit score constraints.
“These reforms have coincided with stronger company and monetary sector steadiness sheets, rising formalisation of employment, and continued enhancements in tax administration,” the Survey added. “Collectively, these developments make a persuasive case that India’s potential development has risen to round 7% over the medium time period.”
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Worst-case state of affairs for the world
The Survey outlined three eventualities for the world economic system that would unfold in 2026. The worst of those, the macroeconomic penalties of which “may very well be worse than these of the 2008 international monetary disaster”, was assigned a chance of 10-20%.
Below this state of affairs, systemic monetary, technological, and geopolitical stresses would amplify one another moderately than going down independently. A key rising danger, the Survey mentioned, was the extent of highly-leveraged investments in Synthetic Funding (AI).
It mentioned these investments have uncovered enterprise fashions which can be depending on “optimistic” execution timelines, slim buyer focus, and long-duration capital commitments.
“A correction on this phase wouldn’t finish technological adoption, however it might tighten monetary situations, set off danger aversion and spill over into broader capital markets,” the Survey mentioned.
With out naming any explicit nations, the Survey additional mentioned that if these developments additionally coincided with “geopolitical escalation or commerce disruption”, the end result may very well be a sharper contraction in international liquidity, a jarring weakening of capital flows, and a “shift towards defensive financial responses throughout areas”.
“Whereas this stays a lower-probability state of affairs, its penalties can be considerably uneven,” the Survey mentioned. The macroeconomic penalties may very well be worse than these of the 2008 international monetary disaster.”
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Extra possible eventualities
The Survey gave its best-case state of affairs a 40-45% likelihood of occurring. Below this state of affairs, situations from 2025 would persist in 2026, albeit in a extra fragile state.
In its third state of affairs, additionally assigned a chance of 40-45%, the Survey mentioned the chance of a “disorderly multipolar breakdown” rises considerably.
“Below this consequence, strategic rivalry intensifies, the Russia-Ukraine battle stays unresolved in a destabilising kind, and collective safety preparations unravel,” the Survey predicted.
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Dangers to India
The Survey mentioned that, in all three eventualities, India is comparatively higher off than most different nations however added that it nonetheless faces dangers.
“The three eventualities pose a standard danger for India: disruption of capital flows and the resultant influence on the rupee,” the Survey mentioned. “Solely the diploma and the period will fluctuate.
It added that this influence will not be confined to a yr, and may very well be extra enduring.
“In response, India must generate adequate investor curiosity and export earnings in overseas forex to cowl its rising import invoice, as, whatever the success of indigenisation efforts, rising imports will invariably accompany rising incomes,” the Survey mentioned.
Printed – January 29, 2026 05:53 pm IST
