Swadeshi To Strategic Power: Eco Survey Lays Out India's Roadmap To Becoming Indispensable

India's Economic Survey said that the country must build "strategic indispensability" as it heads into FY27, with global trade and capital flows now shaped by tariffs and economic statecraft. The survey projects real gross domestic product growth of 6.8% to 7.2% in FY27, and puts FY26 growth at 7.4% in the first advance estimates, with domestic demand driving activity.

India's macro position remains strong, it said, adding that, howver, the external setting has changed. India's performance "has collided with a global system that no longer rewards macroeconomic success with currency stability, capital inflows, or strategic insulation," Chief Economic Adviser V Anantha Nageswaran wrote.

The survey noted that the policy credibility and execution now act as strategic assets. It said India must "run a marathon and sprint simultaneously" to sustain growth while absorbing shocks. It also defines strategic indispensability as a position in global value chains that partners " cannot easily substitute”, reducing the impact of coercive trade and financial measures.

Strategic Indispensability

The survey frames the global setting as less rule-based and more driven by strategic competition, with countries using trade, technology controls and other tools to pursue security goals.

India must respond by strengthening domestic capabilities, improving competitiveness, and shaping standards in areas such as digital public infrastructure, so that integration acts as “influence and insurance" rather than vulnerability, the Economic Survey noted, adding that the strategic indispensability emerges when an economy supplies goods, services or roles that matter enough to global value chains that partners cannot easily replace them.

The near-term outlook rests on domestic demand, contained inflation and healthier balance sheets, but that the external environment requires buffers, redundancy and liquidity, the survey said, calling the stance for 2026 "strategic sobriety rather than defensive pessimism."

Growth Outlook

Noting the FY26 growth that came mainly from household spending and investment, the Economic Survey now estimates private final consumption expenditure at 61.5% of GDP in the ongoing fiscal, the highest level since 2011-12.

The consumption growth stood at 7.5% in the first half of the current fiscal and the gross fixed capital formation rising 7.6% in the first half. The survey says noted that the services remain the largest contributor on the supply side, with services growth estimated at 9.1% in FY26. It also reports a pick-up in manufacturing, with manufacturing growth estimated at 7.0% in FY26 and 8.4% in the first half.

The survey noted an in-house nowcasting model, based on monthly indicators through December 2025, putting Q3 FY26 growth at 7%.

The Survey raises its assessment of India's medium-term potential growth to 7%, up from the 6.5% it assessed three years earlier, citing reforms, sustained public investment and improving productivity conditions.

Inflation And Rates

The survey noted that the inflation eased sharply in FY26, supporting household purchasing power. It reports headline consumer inflation at 1.7% in April to December, driven by a fall in food prices, adding that the core inflation showed persistence mainly because of higher prices for precious metals, and that measures excluding gold and silver point to softer underlying pressures.

The Survey further noted the central bank cut the policy repo rate by 125 basis points since February 2025, and injected durable liquidity through a cash reserve ratio cut of about Rs 2.5 lakh crore, open market operations of Rs 6.95 lakh crore, and a foreign exchange swap of about $25 billion.

The banks passed the easing through to borrowers, with the weighted average lending rate on fresh rupee loans down 59 basis points and the rate on outstanding rupee loans down 69 basis points between February and November 2025, the Economic Survey said, adding that the bank balance sheets remain sound, with gross non-performing assets at 2.2% and a half-yearly slippage ratio at 0.7%.

Fiscal Path And GST Overhaul

The central government continued fiscal consolidation while maintaining capital spending, the survey noted. It reports the FY25 fiscal deficit at 4.8% of GDP, below the budgeted 4.9%, and says the government targets 4.4% in FY26.

It links fiscal consolidation to market confidence, citing a decline in the spread of India's 10-year yield over US bonds and also noting the sovereign rating upgrades in 2025, including an S&P upgrade from BBB- to BBB.

The survey also highlighted the changes to goods and services tax, calling it the most significant overhaul since GST began in 2017.

The GST Council moved to a simplified structure with a standard rate of 18%, a merit rate of 5%, and a 40% rate for select items, with changes effective from Sept. 22, 2025. The gross GST collections in April to December 2025 reached Rs 17.4 lakh crore, up 6.7% from a year earlier. It also reports e-way bill volumes for the same period rising 21% year-on-year.

The rate changes aim to support demand and compliance, and that volume and compliance effects may help revenues hold up, the survey noted.

Rupee, Trade And Capital Flows

India's total exports of goods and services reached a record $825.3 billion in FY25 and continued in FY26 despite tariff uncertainty. For April to December 2025, the merchandise exports rose 2.4% and services exports increased 6.5%, while merchandise imports rose 5.9%.

The current account deficit stayed moderate at 0.8% of GDP in the first half of FY26, as services surplus and remittances offset the goods trade gap. Still, the balance of payments deficit of $6.4 billion in the first half of FY26, versus a surplus of $23.8 billion a year earlier, financed by a drawdown in foreign exchange reserves. 

The foreign portfolio investment flows were mixed and ended April to December 2025 with a net outflow of $3.9 billion, which it links to uncertainty and investor focus on AI-linked assets in the US and parts of Asia.

The rupee depreciated by about 6.5% against the US dollar between April 1 and Jan. 22, 2026, and describes the move as orderly. It says reserves cover over 11 months of imports as of January 16, 2026, and about 94% of external debt as of end-September 2025. 

The rupee's valuation "does not accurately reflect India's stellar economic fundamentals" and says it is "punching below its weight," Nageswaran wrote.

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