​A job well done: on the Economic Survey 2025-26

Context & The Gist

The Economic Survey 2025-26 is in the news as it provides a comprehensive assessment of the Indian economy and proposes a medium-term strategy for sustainable growth. The Survey, authored by the Chief Economic Advisor (CEA), V. Anantha Nageswaran, advocates for a shift towards a more ‘entrepreneurial state’ – one that embraces risk, is adaptable, and encourages experimentation. It acknowledges global economic vulnerabilities while highlighting India’s relative stability and outlines a path towards ‘strategic indispensability’.

The central thesis of the Survey is that India needs to proactively address structural weaknesses and build resilience against potential global crises. It emphasizes the importance of fiscal discipline at the state level, strategic investments, and a forward-looking policy approach that is willing to learn from failures. The Survey doesn't shy away from pointing out emerging challenges like the impact of ethanol production on food security and the costs associated with the energy transition.

Key Arguments & Nuances

• Entrepreneurial State: The Survey champions a move away from risk-averse policymaking towards a more dynamic and experimental approach. This involves accepting the possibility of failure as a learning opportunity.
• Global Economic Risks: It assigns a significant probability (10-20%) to a global crisis in 2026, potentially worse than 2008, even in its best-case scenario.
• Rupee Depreciation: The Survey attributes the falling rupee not to India’s economic fundamentals, but to capital flows towards AI-focused nations and safe-haven assets.
• Strategic Indispensability: India needs to move beyond being merely a part of global supply chains and develop strategic importance to become indispensable.
• Fiscal Discipline: The Survey cautions against fiscal populism by states, highlighting the Centre’s success in reducing its fiscal deficit while many states are facing revenue deficits.
• Emerging Challenges: It identifies several emerging problems, including the impact of ethanol production on food security, the costs of renewable energy transition, fodder scarcity, and the negative effects of excessive smartphone use.

UPSC Syllabus Relevance

• Indian Economy: Growth and Development, Government Policies, Fiscal Policy.
• Governance: Government policies and interventions, issues related to planning, resource mobilization.
• Polity: Centre-State relations, Fiscal Federalism.

Prelims Data Bank

• Economic Survey: An annual report prepared by the Ministry of Finance, detailing the state of the Indian economy.
• Chief Economic Advisor (CEA): The principal economic advisor to the Government of India.
• Fiscal Deficit: The difference between the government's total revenue and its total expenditure.
• Revenue Deficit: The excess of revenue expenditure over revenue receipts.
• Strategic Indispensability: A concept referring to a nation's critical role in global supply chains and economic systems, making it essential for other countries.

Mains Critical Analysis

The Economic Survey 2025-26 presents a nuanced picture of the Indian economy, acknowledging both its strengths and vulnerabilities. A PESTLE analysis reveals the following:

• Political: The Survey’s emphasis on fiscal discipline for states is likely to face political resistance, especially with upcoming elections in several states.
• Economic: The call for ‘strategic indispensability’ requires substantial investment in research and development, infrastructure, and skill development. The impact of a weak rupee on import-dependent industries is a significant concern.
• Social: The recognition of the negative impact of “compulsive scrolling” highlights the need for policies addressing digital well-being and responsible technology use.
• Technological: The Survey acknowledges the capital outflow towards countries with advanced AI industries, emphasizing the need for India to invest in and promote AI development.
• Legal: The need for greater fiscal flexibility for the Centre requires careful consideration of constitutional provisions and existing fiscal rules.
• Environmental: The Survey points to the real costs of the shift to renewable energy and the impact of ethanol production on food security, requiring a balanced approach to sustainability.

A key critical gap is the lack of concrete policy recommendations to address the identified challenges. While the Survey highlights the problems, it largely stops short of providing detailed solutions. The emphasis on an ‘entrepreneurial state’ is commendable, but its practical implementation requires a clear roadmap and institutional mechanisms.

Value Addition

• NITI Aayog’s Strategic Policy Framework (2018-2023): This framework also emphasized the need for a long-term vision for India’s economic development, focusing on areas like infrastructure, agriculture, and social sector development.
• Kelkar Committee (2022): This committee recommended a roadmap for fiscal consolidation, aligning with the Survey’s emphasis on fiscal discipline.
• Quote: “The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese Proverb (Relevant to the Survey’s call for proactive policymaking).

Context & Linkages

The previous article highlighted similar concerns regarding sluggish household consumption, weak private investment, and a depreciating rupee. This year’s Survey builds upon these observations, offering a more comprehensive framework for addressing these challenges. Both surveys emphasize the need to attract foreign investment and maintain fiscal discipline, demonstrating a continuity in policy concerns.

This article noted the recovery in household consumption but underscored the stagnation in private investment. The current Survey echoes this concern, implicitly acknowledging that sustained growth requires a revival in private investment, which necessitates addressing underlying structural issues and fostering a more conducive business environment.

The Way Forward

• Strengthen Strategic Resilience: Invest in diversifying supply chains, promoting domestic manufacturing, and building strategic reserves of essential commodities.
• Promote Fiscal Discipline: Encourage states to adopt responsible fiscal policies and reduce reliance on unconditional cash transfers.
• Invest in AI and Technology: Allocate resources to research and development in artificial intelligence and other emerging technologies.
• Address Emerging Challenges: Develop policies to mitigate the impact of ethanol production on food security, manage the costs of renewable energy transition, and promote digital well-being.
• Enhance Policy Experimentation: Create a framework for pilot projects and experimentation with new policies, allowing for learning from failures.