OPINION | Economic Survey emphasises building strategic influence

Indian economy’s ability to fight risks.

As the Chief Economic Adviser V Anantha Nageswaran had indicated in an opinion piece ahead of the Economic Survey, geopolitics and global uncertainty emerged as defining themes of the report. While these forces pose clear risks to India, the Survey underscored the imperative of strengthening domestic fundamentals to cushion against external shocks—recognising that the global environment may yet deteriorate. As the proverb goes, a house built on strong foundations can withstand any storm.

Three different scenarios

The first job was to ascertain how big the problem might get. To this end, the survey outlines three scenarios of various risk intensities. The ‘best-case’ scenario of a ‘managed disorder’, which was allocated 40-45% probability, final stress episodes, trade frictions and geopolitics introduce volatility and government intervention but do not trigger a systemic collapse.

Almost similar probability was allocated to the second scenario, which involved a disorderly multipolar breakdown, where geopolitical tensions intensify and countries face trade-offs between stability, growth and autonomy.

A third and severe scenario, which received a 10-20% probability outlined a 2008 GFC-like effect, with broader risk-aversion with financial market as well as real economy implications.

Indispensability through manufacturing

Beyond the stage-setting, the survey portrayed inherent optimism on the Indian economy’s ability to fight these risks. While a lot of arguments were presented, there was a strong case for a single-minded focus on expanding manufacturing capabilities. Interestingly, manufacturing was framed as a "disciplining system" that would force improvements in logistics, power, and regulation because production failures in this sector are immediately and externally visible.

The emphasis was also on the economy finding its key bargaining chip, which will contribute to its “strategic indispensability”, i.e., integrate the Indian economy so deeply into global networks that others are invested in its continued functioning. This requires moving beyond assembly to high-tech manufacturing, as seen in the India Semiconductor Mission, which aims to secure domestic capacity in the "heart" of modern technology.

There were also suggestions on finetuning the AI adoption strategy to domestic realities. Instead of focusing on expansion of heavy compute infra which will not only add to the debt stock, but also strain existing resources, the preferred route would be to undertake a bottom-up AI strategy focused on application-specific, small models that are computationally efficient and tailored to local needs in health, agriculture, and education.

State capacity and economic growth

In midst of these myriad changes, the survey does not lose sight of the importance of building the depth and quality of state capacity, particularly about the state’s ability to execute plans through administrative judgment and technical competence. After all, this was one of the reasons why aggressive increase in allocations towards capex spending, especially infrastructure, is ill-advised before strengthening capacity. In this context, the Survey identifies bureaucratic risk aversion as a significant hurdle, where good-faith decisions are often subjected to retrospective scrutiny, leading to policy inertia. To counter this, it advocates for the "Entrepreneurial State"—one that acts under uncertainty, learns from systematic experimentation, and corrects course without paralysis. It goes to provide the required reforms to enhance state capacity.

In all, the Economic Survey pegged FY27 GDP growth at 6.8% to 7.2%, slightly higher than street estimates, from a projected 7.4% in FY26. The FY27 Budget might undertake smaller steps to achieve few of the objectives outlined in the survey. Along with strong growth, the authorities will be keen to build and assert their strategic influence over time, with an immediate need to strengthen shock absorption mechanisms. An undervalued rupee for one does not seem to be raising the hackles for the time being.

(Views are personal and do not represent the stand of this publication.)