FY26 growth at 6.3-6.8%, job push, AI worries for labour market and more: Key takeaways from Economic Survey

Eco survey called for an industry-wide push for deregulation, particularly to strengthen the country's small and medium enterprises (SMEs)

The Economic Survey, the government’s report card of the state of the Indian economy tabled in Parliament on January 31, pegs India's FY 26 growth at 6.3-6.8 percent.

The government’s estimate range is in line with the International Monetary Fund’s 6.5 percent but lower than the 6.7 percent projected by the World Bank.

Released a day before the budget, the survey also talked about “Getting out of the way and allowing businesses to focus on their core mission is a significant contribution that governments around the country can make to foster innovation and enhance competitiveness."

From job worries in the age of artificial intelligence (AI) to energy transition in an increasingly uncertain world, here are the key takeaways from the survey:

FY26 Growth

-India’s economy will grow at 6.3-6.8 percent in the financial year 2025-26, according to the Economic Survey tabled by finance minister Nirmala Sitharaman on January 31.

-The government’s estimate range aligns with the International Monetary Fund’s projection of 6.5%, but is lower than the 6.7% forecasted by the World Bank.

Record revival of FDI

-Gross Foreign Direct Investment inflows recorded a revival in FY25, increasing from $47.2 billion in the first eight months of FY24 to $55.6 billion in the same period of FY25, a YoY growth of 17.9 percent.

-Overall exports (merchandise + services) have grown steadily in the first nine months of FY25, witnessing a YoY growth of 6 per cent. This demonstrates the resilience of the export sector, which has been building on a steady upward trend in recent years despite global economic challenges.

-Services sector exports have demonstrated strong performance, growing by 11.6 per cent in the first nine months of FY25 amidst challenging geopolitical conditions.

-FDI equity inflows stood at $29.8 billion in FY25 (April- September), while
the services sector witnessed $5.7 billion inflow in the same period.

-It highlights the need for accelerating FDI in Financial services (Focus areas: fintechs, digital services, global market access), while noting that Insurance sector is untapped with focus specified as digital insurance and customer centric products.

-India’s forex reserves are sufficient to cover 90 percent of external debt and provide an import cover of more than ten months.

-India’s foreign exchange reserves increased from $616.7 billion at the end of January 2024 to $704.9 billion in September 2024 before moderating to $634.6 billion as on January 3 2025.

Capex

-Government has focused on infrastructure development over the past five years.

-The Union Government’s capital expenditure on key infrastructure sectors has grown at a rate of 38.8 per cent from FY20 to FY24. InFY25, following the electoral process, capex picked up momentum between July and November 2024.

Inflation

-Retail headline inflation, as measured by the change in the Consumer Price Index (CPI), has softened from 5.4 percent in FY24 to 4.9 percent in April – December 2024. The decline is attributed to a 0.9 percentage point reduction in core (non-food, non-fuel) inflation between FY24 and April – December 2024.

-The government’s proactive policy interventions have been crucial in stabilizing inflation. These measures include the strengthening of buffer stocks for essential food items, periodic open market releases and efforts to ease imports during supply shortages.

-The Reserve Bank of India and the International Monetary Fund project that India’s consumer price inflation will gradually align with the target of around 4 per cent in FY26.

Focus on AI

-AI is anticipated to surpass human performance in critical decision-making across various fields, including healthcare, research, criminal justice, education, business, and financial services. This can result in large scale labour displacement, especially at the middle- and lower-quartiles of the wage distribution.

Infrastructure

-The pace of infrastructure development in critical sectors such as railways, roads, airports, and ports has largely remained steady, with capacity additions continuing on track.

-Under railway connectivity, 2031 km of railway network was commissioned between April and November, 2024, and 17 new pairs of Vande Bharat trains were introduced between April and October 2024.

-The government has introduced various PPP models, including BOT, hybrid annuity models, and TOT, and has created mechanisms such as the National Infrastructure Pipeline and National Monetisation Pipeline to facilitate private sector involvement. These efforts would need to be supplemented with wholehearted acceptance of the need for public-private partnerships in infrastructure across the country.

-In FY25 (April-Dec), 5853 km of National Highways constructed

GCCs/Tech sector

-Tech exports reached nearly USD 200 billion, reflecting a growth of 3.3 per cent, while the domestic market is expected to expand by 5.9 per cent, crossing USD 54 billion in FY24.

-The sector maintained its position as a net hirer, adding 60,000 employees to reach a workforce of 5.43 million in FY24.

-The number of GCCs in India has grown from approximately 1430 in FY19 to over 1700 in FY24. As of FY24, GCCs in India employ nearly 1.9 million professionals.

Power sector

-Given the current state of technological development in the area of renewable energy and limitations to the scaling up of renewable energy generation to meet the huge energy demand for the achievement of the vision of Viksit Bharat, thermal power has an important role to play in India’s sustainable development as coal is the only reliable and affordable energy source at present.

-There is a need to promote the efficient use of coal by utilising super-critical (SC), ultra-super-critical (USC) and the recently developed Advanced Ultra Super Critical (AUSC) technologies in coal-based power plants to reduce the emission intensity of the economy.

Climate change

-Developing countries such as India have to bear a disproportionate burden of climate change and have no choice but to face the climate change consequence of historical emissions.

-Hence, India needs to undertake climate adaptation on an urgent footing as this has a direct impact on lives, livelihoods and the economy.

Telecom sector

-The rollout of 5G services, along with the introduction of new policies aimed at enhancing telecommunications infrastructure and user experience, has played a crucial role.

-By October 31, 2024, 5G services were launched in all states and union territories. Currently, 5G services are available in 779 out of 783 districts11. Over 4.6 lakh 5G Base Transceiver Stations (BTSs) have been installed nationwide.

Job creation

-India would have to create an average of 78.5 lakh jobs annually in the non-farm sector by 2030 to cater to the rising workforce.

-Further, India is a majorly services driven economy, with a significant share of the I.T. workforce employed in low value added services. Such jobs are the most susceptible to automation, as firms in a bid to cut costs may substitute labour for technology.

-India is also a consumption based economy, thus the fall in consumption that can result from the displacement of its workforce is bound to have macroeconomic implications. If the worst-case projections materialise, this could have the potential to set the country’s
economic growth trajectory off course.

-The digital economy has significantly broadened job opportunities, encompassing
roles from delivery personnel, cab drivers, and beauty professionals to software engineers
and data analysts.

-Hyperlocal service platforms have revolutionised the job landscape in the transportation, food delivery, and home services industries. These platforms have created flexible employment options by leveraging technology while transforming traditional service sectors into digitally driven ecosystems.

-According to NITI Aayog, the gig workforce is projected to reach 23.5 crore by 2029-30, comprising 6.7 per cent of the non-agricultural workforce and 4.1 per cent of total livelihoods, reshaping the labour market.

Mental health

-Mental well-being is recognised as an economic issue and highlighted, in some detail, the increasing prevalence of mental health issues worldwide and in India and its likely impact on the economy.

-Data suggests that mental well-being is not static; indeed, there are a myriad of
factors, including workplace culture, hours spent working, and lifestyle, that influence
mental well-being.