What the Economic Survey 2025–26 Really Tells Me About Our Money, Work, and Society – Post 1/2

I read the Economic Survey every year—but not as an economist or a policymaker. I read it as a citizen, a taxpayer, someone who works, saves, invests, and worries about whether India’s growth story translates into better lives.

This year’s Survey felt different.

On the surface, India looks exceptionally strong. Real GDP growth is expected to exceed 7%, inflation is largely anchored, banks are well-capitalised, corporate balance sheets have healed, and public capital expenditure is at multi-decade highs. The Union Government closed FY25 with a fiscal deficit of 4.8% of GDP, better than the budgeted 4.9%, and has committed to 4.4% in FY26—a dramatic consolidation from 9.2% in FY21.

India also received three sovereign credit rating upgrades in 2025, including S&P’s upgrade from BBB- to BBB, the first such upgrade from a major agency in nearly two decades.

And yet, the Survey repeatedly lands on an uncomfortable truth: macroeconomic success no longer guarantees currency stability, cheap capital, or protection from global shocks.

Despite strong growth, the rupee underperformed in 2025, foreign investors hesitated, and gold prices surged from about USD 2,600 to over USD 5,100 per ounce, reflecting global fragility rather than domestic panic.

So instead of asking “How fast are we growing?”, this Survey forces a harder question: How resilient is India’s income model, trade position, productivity, currency, technology adoption, cost of capital—and social contract—in a fractured world?

I’ve organised my takeaways into seven buckets, each with implications for the following groups:

• Corporates
• SMEs
• Working individuals
• Families and long-term wealth

In the end, I have added annexures with key numbers, trade-offs and watch points. Don’t miss taking a glance at these tables.

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The blog is presented in two parts. This is the first part.

 

Bucket 1: Revenue Generation — Where Will India’s Income Come From?

One thing is clear to me: India’s growth is no longer consumption-led alone.

The Survey shows that sustained public capital expenditure, a renewed manufacturing push, and services exports are now doing the heavy lifting. Since 2020, India’s total exports grew at ~9.4% CAGR, but merchandise exports grew only ~6.4%, with services filling the gap.

That gap matters.

For corporates, revenue growth is shifting from the “India demand story” to supply-chain participation. The Survey is explicit: negotiated protection for upstream industries ultimately taxes downstream competitiveness. In simple terms—tariff-protected margins won’t last.

For SMEs, formalisation is no longer optional. States that reduced regulatory friction and improved logistics saw materially higher MSME credit growth and formal employment. Informality may reduce taxes—but it caps revenue.

For working individuals, income growth is increasingly driven by skill premiums rather than inflation-linked wage drift. In practical terms, this means upgrading skills, switching roles or sectors when needed, and not assuming annual increments alone will protect purchasing power.

For families and long-term wealth, I read this as a move away from passive rent-seeking towards assets and businesses that participate in real economic activity—manufacturing, logistics, formal services, and export-linked enterprises—rather than relying only on static yield or price appreciation.

Businesses and assets tied to manufacturing ecosystems, logistics, energy, and formal services are likely to compound faster than traditional “safe yield” assets.

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Bucket 2: Exports & Imports — Why Services Alone Won’t Save Us

This was one of the Survey’s bluntest messages.

India runs a persistent goods trade deficit. Services exports and remittances help, but they are not enough to deliver durable currency stability. Every country with a consistently strong currency—Germany, Japan, South Korea, China—is a manufacturing export powerhouse.

India is not there yet.

Because manufacturing exports lag, India depends on foreign capital inflows to balance its external account. When those flows slow—as they did in 2025—the rupee pays the price.

Corporates should treat FTAs (especially the EU FTA) as opportunities only if they can produce at globally competitive cost and quality.

SMEs face a hard fork: integrate into global value chains—through quality standards, scale, and formal compliance—or be squeezed over time by input costs, logistics inefficiencies, and currency volatility. Standing still is no longer a neutral option.

Working individuals may not track exports daily, but export-linked jobs are far more resilient during global shocks.

Families should assume that a structurally weaker rupee is a base case, not a temporary phase, and plan savings and investments with this reality in mind—especially for education, travel, imported goods, and long-term purchasing power.

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Bucket 3: Risks — Productivity, People, and the Quiet Constraint

If I had to pick the most underappreciated risk, it is productivity.

India’s potential growth has been revised upward to 7%, from 6.5% three years ago, driven by infrastructure and logistics. But the Survey is candid: human capital is now the binding constraint.

Skill mismatches, low female labour participation, health challenges, and uneven learning outcomes quietly erode long-term growth.

Corporates can no longer rely on cheap labour. Output per worker, not headcount, will determine margins.

SMEs increasingly cite skill shortages as their biggest constraint. Firms investing in training show significantly better survival and scaling outcomes.

Working individuals should read this clearly: income security comes from continuous skilling. The Survey explicitly links obesity, non-communicable diseases, and digital addiction to productivity loss.

Families often insure financial assets but ignore human capital. That is a mistake. In a productivity-driven economy, investments in education quality, health, and continuous skill development are as critical to long-term family wealth as financial savings.

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Bucket 4: Exchange Rate — Why the Rupee Feels Weak Despite Strong Growth

This section resonated deeply with me.

The rupee underperformed in 2025 not because inflation was high or growth weak, but because global capital has become geopolitical and risk averse. Countries running current account deficits—like India—must pay a premium.

Even Indonesia, with the same BBB credit rating, borrows more cheaply (~6.3% vs India’s ~6.7% on 10-year bonds), partly reflectin different external balances.

Corporates must treat FX risk as structural and build it into pricing, sourcing, and capital allocation decisions rather than managing it as a temporary or tactical issue.

SMEs with thin margins are especially exposed to currency volatility, making cost control, supplier diversification, and basic risk awareness critical for business stability.

Working individuals may not feel it immediately, but currency weakness eventually affects fuel, electronics, education, and overseas exposure—making budgeting, career choices, and long-term savings more sensitive to global conditions than before.

Families should understand gold’s rise as rational insurance—not sentiment—and treat it as a portfolio stabiliser against currency, geopolitical, and financial shocks rather than as a short-term return-seeking asset.

“In a world that rewards resilience over speed, India must keep running the marathon like a sprint—without tripping.”

                                                                                                                                                       Contd..

Post 2 will pick up from here—by examining how technology, capital, and policy choices will determine whether that sprint builds endurance or exhaustion.