Clipped from: https://www.thehindubusinessline.com/opinion/editorial/growth-strategy/article70566234.ece
Survey cites global risks to robust economy
Chief Economic Adviser, Dr. V. Anantha Nageswaran, during a press conference after tabling of Economic Survey 2025-26 in Parliament at the National Media Centre, in New Delhi on Thursday. | Photo Credit: ANI
The Economic Survey 2025-26, like most recent Surveys, has two strands to it: first, it assesses growth prospects in the upcoming year; and second, it elaborates on issues governing medium-term growth. On the former, the Survey refers to India’s robust fundamentals and predicts a real growth rate of 6.8-7.2 per cent in FY27. On the second, the Survey says that growth, financial stability and strategic autonomy can only be sustained by turning a current account deficit into surplus — through manufacturing. Indeed, the Survey even suggests that services has done its share of heavylifting for the external account.
As for near-term prospects, the Survey asserts, and not without basis, that a growth paradox is at work — where a falling rupee and capricious capital flows have little to do with robustness of the economy. A country with comfortable food stocks, a large domestic market, “a less financialised growth model”, comfortable forex reserves, low inflation, low NPAs and strong corporate balance sheets can weather global turbulence. In fact, it says that the potential growth rate of the economy has risen from 6.5 per cent to 7 per cent over three or four years, following factor market reforms. Yet, the Survey expects intensified trade, financial and technological headwinds this year. In perhaps a statement that could reflect the tone of the Budget, the Survey calls for “strategic sobriety rather than defensive pessimism”. The focus on growth through domestic drivers will have to be accompanied by an emphasis on ‘shock absorption’. With the external account being an area of worry, fiscal consolidation has become a sine qua non. India’s inclusion in the global bond indices implies that bond yields could be more responsive to deficit changes.
For the medium term, the Survey’s perspective on current account deficits stands out in contrast to the received wisdom that emerging economies can run such deficits. It argues that as interest rates rise in the developed world alongside a rise in inflation, a country that runs a CAD and needs capital flows must pay “a risk premium” to attract capital from those markets. The times have changed – the ‘Great Moderation’ is long over, and the cost of capital in India has risen. Here, the Survey suggests adoption of the East Asian route to becoming a manufacturing powerhouse. A policy focus in this regard already exists, in the form of production linked incentives. Interestingly, Chief Economic Advisor V Anantha Nageswaran said at the press briefing that manufacturing must deliver over time on the incentives accorded. It is perhaps a note of caution that the ‘infant industry’ approach could create inefficient enclaves if not properly managed.
The theme to revive manufacturing is not new — but the context is changing. Globalisation is passe, and strategic autonomy matters as uncertainties loom. However, in seeking to emulate the Tiger economies, it should not be forgotten that an investment in human capital lay at the root of their economic miracle. It is to be hoped that the Budget keeps this in mind.
Published on January 29, 2026
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