CEA Nageswaran: How India can sustain its pace of economic growth amid dramatic structural breaks and regime shifts

Meanwhile, India has been patient, absorbing the pressure and quietly going about its goal of economic transformation, lifting aspirations and delivering on them. This is the backdrop in brief for the Economic Survey.

This fiscal year has been another good one for economic growth and macroeconomic stability. As of now, estimated growth in real terms is 7.4%. India has sustained growth since the pandemic and has roughly halved the Union government’s fiscal deficit as a proportion to gross domestic product—based on the projected 2025-26 budget deficit announced in February 2025—even while significantly ramping up public infrastructure investment. In other words, deficit reduction has been accompanied by an improvement in the quality of fiscal expenditure.

Fiscal prudence, conservatism and economic growth earned the country three credit-rating upgrades last year. India looks set to build on this record and enjoy a longer period of non-inflationary growth that has eluded it in previous cycles. That the banking sector is healthy and capital markets remain enthusiastic about funding startups are additional support factors. The geopolitical environment, however, guarantees a rough ride.

Since the beginning of 2025, the price of one dollar in Indian rupees has gone up by more than 6%. Over this shorter horizon, several other emerging-market currencies have performed better. However, when the frame is widened to a six-year window beginning February 2020, most major emerging-market currencies, including the Indian rupee, have weakened against the dollar by a similar magnitude.

Countries that run current account deficits are inherently vulnerable during periods of geopolitical discontinuity, as cross- border capital flows become sensitive to political signals. Money is no longer neutral.

Countries that have built a strong manufacturing base, export manufactured goods and run external surpluses have enjoyed strong and stable currencies in the post-Bretton Woods era. But they did so at a time when the climate was not a pressing concern and energy-transition considerations were distant. They were also not required to reckon with a hyper-competitive manufacturing powerhouse like China, which posted a trade surplus exceeding $1 trillion in 2025.

At the same time, manufactured goods and primary as well as intermediate inputs have become part of the strategic balancing that countries engage in. As a result, indigenization has acquired an urgency that did not exist even half-a-decade ago. Further, rapid advances in artificial intelligence over the last year have raised new questions for a nation that needs to generate at least 8 million jobs annually.

These themes frame the issues that the Economic Survey for 2025-26 wrestles with. In addition, the questions that it attempts to answer include: Has India done enough to lift its growth rate and sustain it? How should India go about pursuing the twin imperatives of indigenization and enhancing export competitiveness? How does one achieve a structural reduction in the cost of capital, which is an important input cost?

The state has to organize and equip itself differently than before to respond to these questions and deliver on development in the backdrop of an unprecedented global environment.

Generally, analyses in the public domain focus on the role of public policy in addressing national priorities. Democratic governments indeed have a large share of responsibility in shaping the vision and guiding its realization. But nation-building is a collective endeavour. Wealthier nations did not reach their present position on the strength of the state alone; corporate leadership also played a role that extended beyond narrow balance-sheet considerations. Can, and will, India’s private sector leadership rise to the occasion?

While it is generally true that leaders inspire people, the converse is equally true and possible. Citizens have an important role in the nation’s progress. Each takes a cue from the other. The trade-off between instant and delayed gratification matters in individual and public affairs.

The choices people make about the food they eat, the data they consume, the respect they accord public goods and the fiscal support they expect from the government dictate the policy choices the government makes. These expectations and their fulfilment, or lack thereof, influence not only the nation’s short-term growth trajectory, but also its long-term prospects.

The Economic Survey aims to inform the public about the state of the economy and stimulate discussion on the issues confronting both the governed and the governing, the paths that lie ahead and the ones they must decide to tread. Given the depth and breadth of topics to be covered, the Economic Survey this time is longer than usual. It is also organized differently from previous editions.

India offers unparalleled scope for policymakers, students, teachers and practitioners to contribute to and learn from its exciting growth prospects. We hope that the latest edition of the Economic Survey will serve as both a milestone and signpost in this journey.

The author is chief economic advisor to the Government of India.