Economic Survey 2025-26

 The Economic Survey forms the bedrock of the annual ritual called Budget for the Indians. The latest sruvery that was tabled by the Indian FM today paints a portrait of an economy in motion—one foot firmly planted in resilience, the other tentatively stepping toward transformation. In my view, behind the confident prose about growth rates lies a more complex story of structural faultlines, unrealized potential, and choices deferred. The Survey describes an economy with genuine strengths and clear opportunities. But it also reveals—sometimes despite itself—an economy whose potential remains constrained by solvable problems left unsolved. Let me break it up further, from what I understand.

Firstly, The Good

1) Growth with substance: India's outperformance isn't statistical luck. Domestic demand—both consumption and investment—reflects genuine momentum. Businesses are investing, households are spending, and the economy's internal engine is firing.

2) Macro stability matters: Low inflation plus fiscal consolidation represents unglamorous but critical work done right. Credit rating upgrades lower borrowing costs and signal to global investors that India remains relatively safe in a volatile world. In my view, inflation may have bottomed out, ie, I am expecting inflation to RISE, going forward.

3) Capital market awakening: Proposals to reduce debt instrument taxes and strengthen alternative financing recognize a crucial bottleneck. India's over-reliance on bank credit has constrained infrastructure and climate investment. Diversifying financing channels could unlock capital where it matters most.

Now, The Bad

1) MSME payment crisis: ₹8.1 lakh crore in delayed payments isn't a rounding error—it's a crisis hiding in plain sight. Small businesses are India's job creation engine. When payments get systematically delayed, they curtail hiring, abandon expansion, and sometimes close. This is money that should be circulating through the economy, trapped instead in payment limbo.

2) External vulnerabilities: "Global geopolitical tensions" and "fluctuating capital flows" sound diplomatic, but the threats are concrete—supply chain disruptions, trade wars, sudden capital reversals. India's global integration brings opportunities but also exposes us to shocks beyond our control.

3) Rising import dependence: As incomes grow, so does our import bill. This exposes our manufacturing sector's persistent inability to compete on quality and price for many consumer goods.

The Ugly

The ugliest truths hide in what the Survey doesn't emphasize:

•⁠  ⁠"Removing bottlenecks in labor, land, logistics, and trade" is technocratic code for politically fraught reforms that successive governments have failed to implement

•⁠  ⁠These aren't minor adjustments—they're fundamental restructurings requiring taking on entrenched interests

•⁠  ⁠Strong growth numbers can mask structural weaknesses and breed complacency

Threats

1) Economic nationalism rising: Tariffs and trade restrictions proliferate globally. India's export sectors—IT services, pharmaceuticals, textiles—face mounting uncertainty

2) Complacency danger: Are we growing because we're fundamentally improving or because others are struggling? The Survey's rosy outlook risks encouraging policy drift when aggressive reforms could compound our advantages

Opportunities

1) Capital market transformation: India's infrastructure deficit, climate needs, and startup ecosystem require financing at scales traditional banking cannot provide. Robust corporate bond markets and diversified investment vehicles could be transformative.

2) AI governance leadership: Rather than copying Western frameworks, India could shape global norms around AI safety and ethics. This requires moving from aspiration to concrete institutions.

3) Consumption-investment synergy: When household spending and business investment rise together, you get self-reinforcing momentum. Businesses invest to meet demand, creating jobs that fuel more consumption. Sustaining this cycle is the prize.

Bottomline:

•⁠  ⁠The ₹8.1 lakh crore payment bottleneck isn't an act of God—it's failed contract enforcement

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•⁠  ⁠External vulnerabilities can be mitigated through export diversification and manufacturing strengthening

•⁠  ⁠Capital market deepening requires legislative action, not just proposals

What's striking is how clearly the Survey identifies what needs doing—and how tentatively it proposes doing it. India's economic story for the coming year will be written not by the macroeconomic trends we observe but by the microeconomic reforms we enact or avoid.

The foundations are sound. The question is whether we'll build something worthy of them.