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| India's Economy Set for 7.4% Growth in FY26, Private Sector Investment Key: Economic Survey |
New Delhi: India's economy is projected to grow at 7.4% in the financial year 2025-26, according to the Economic Survey tabled in Parliament on Thursday by Finance Minister Nirmala Sitharaman.
The survey, authored by Chief Economic Adviser V. Anantha Nageswaran, forecasts growth will moderate slightly to between 6.8% and 7.2% in FY27, while emphasizing the critical need for increased private sector participation in investment and job creation.
Strong Foundation Amid Global Uncertainty
The optimistic growth projection comes despite a turbulent global economic environment marked by tighter US tariffs and uncertainty surrounding AI-driven growth. India's forecast aligns closely with international estimates, with the IMF projecting 7.3% growth and the World Bank estimating 7.2% for the current fiscal year.
The survey attributes India's resilience to regulatory reforms, a strong macroeconomic foundation, and recent policy initiatives including GST rationalization, income tax relief, and streamlined FDI and bankruptcy regulations. A simplified direct tax law is scheduled to launch in April.
Private Investment Imperative
A central theme of the survey is the urgent call for India's private sector to accelerate investment, particularly as artificial intelligence and emerging technologies reshape traditional labor markets. While public capital expenditure has surged from Rs 5.93 trillion in FY22 to Rs 11.21 trillion in FY26—reaching 3.1% of GDP—the survey emphasizes that sustained growth toward India's 2047 development goals will require a significant pivot to private investment.
Inflation Under Control, AI Risks Flagged
On the inflation front, the news remains positive. The Reserve Bank of India projects CPI inflation at just 2% for the year, well below its 4% target, driven largely by corrections in food prices. However, lower inflation has impacted nominal GDP, now estimated at 8%, falling short of the budgeted 10.1% target.
The survey also sounds a note of caution regarding global risks, citing IMF warnings of a potential "AI bubble" that could trigger market corrections, slow capital flows, and damage household wealth.
Manufacturing and Self-Sufficiency Push
India's manufacturing strategy focuses on global supply chain diversification, quality improvements, and deeper trade partnerships. The country is also prioritizing self-sufficiency in semiconductors and other critical sectors as part of its long-term economic security.
A new GDP series with a 2022-23 base year will inform the second advance estimate due February 27, though economists expect minimal impact on growth figures.
The Economic Survey sets the stage for the Union Budget, providing a comprehensive assessment of the economy's performance and future trajectory as India navigates both domestic priorities and global economic challenges.
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