The goal of India’s Economic Survey 2025–26 is to provide a thorough, data-driven evaluation of the country’s economic performance (India Budget 2026 highlights).
Key Insights from the Economic Survey 2025–26
Its importance comes from acting as a policy blueprint (Economic Survey 2026 key insights) that highlights important issues and reform goals to guide budgetary decisions (Budget 2026 fiscal policies) and convey to investors how the government is thinking.
As anticipated, external issues take up a significant amount of space in the most recent Economic Survey (India exports and manufacturing reforms). This makes sense given the rising geopolitical tensions, the ongoing Trump tariffs, and the declining rupee (down 6.5% since April 2025) amid erratic capital flows that are upsetting the nation’s stock market (PLI scheme 2026 expansion).
Structural Challenges Facing India
The high cost of capital, manufacturing’s poor performance and lack of integration with global value chains (GVCs), state-level fiscal populism, the uneven use of agricultural inputs and low farm productivity, urban governance and stressed urban infrastructure, unemployment, and public health are among the other significant issues raised by the survey.
According to the Survey, trade policy is becoming more and more influenced by “security considerations” rather than “cost effectiveness” as the world moves toward a state of “controlled disorder.” Supply chains are realigning as coercive trade measures take the place of adherence to global trade regulations.
External Risks and Trade Balance
Remittances and trade surpluses in services are not enough to make up for significant trade deficits in merchandise in India. Because of this, India’s strong balance of payments depends on foreign capital inflows, and any disruption to these flows has an impact on investor confidence and the stability of the rupee.
It goes on to say that India’s high cost of capital is a structural result of its reliance on foreign savings and ongoing current account deficits. India must become a “surplus-generating economy” through export-led growth and increased connectivity with manufacturing networks in order to permanently lower this cost.
Goods-Based Export Ecosystem
Although they have been the staple, services cannot replace a strong “goods-based export ecosystem.” India must become a crucial, non-replaceable node in global value chains in order to go from “strategic resilience” to “strategic indispensability.”
In addition to reiterating its commitment to accelerating upcoming trade agreements, particularly the one with the US, the Budget is anticipated to highlight the significance of free trade agreements (FTAs) in increasing exports.
Rationalization of Import Charges
Further rationalization of import charges is anticipated to solve what is known as the inverted duty structure—lower duties on finished goods and higher duties on raw materials and intermediates—in order to boost industrial competitiveness and goods exports.
It is anticipated that lowering taxes on essential industrial inputs, such textile fibers, will lower manufacturing costs for downstream businesses. Quality Control Orders (QCOs) that make it challenging to find inputs may also be further withdrawn or rationalized.
📦 Export & PLI Program Expansion
- PLI Program: Expected to extend to additional industries
- Export Incentives: Labor-intensive sectors targeted
- Customs Laws: Rationalization for smoother trade
- FTAs: Acceleration of agreements, especially with US
- Goal: Increase exports & rupee stability
To increase exports and promote job development, we can anticipate the Production Linked Incentive (PLI) program being extended to further industries.
The Budget is anticipated to take into account increasing export incentives for labor-intensive businesses severely impacted by Trump’s tariffs, as well as expanding and reinforcing export promotion missions, since the Survey contends that exports are the key to rupee stability. It is reasonable to anticipate export facilitation measures, such as additional rationalization of customs laws and regulations.
State Fiscal Challenges
States’ unconditional cash transfers and growing revenue deficits present concerns by “crowding out growth-enhancing capital expenditure.” The cost of sovereign borrowing is becoming more and more impacted by state budgetary indiscipline.
The Special Assistance to States for Capital Investment (SASCI) framework may therefore be strengthened in Budget 2026, possibly through the introduction of more stringent performance-linked conditionalities that incentivize states to reduce revenue deficits while sustaining capital expenditure.
Corporate Capital & Investment
It is anticipated that plans to deepen the corporate bond market will increase private capital expenditures by lowering the cost of capital for businesses and decreasing reliance on bank-led loans.
There will probably be some announcements to reassure foreign investors about tax certainty. However, given budgetary restrictions, the government is unlikely to lower or eliminate long-term capital gains tax, which could not be well-liked by the nation’s financial markets.
💹 Corporate & State Fiscal Focus
- Corporate Bonds: Deepening market to lower cost of capital
- Tax Certainty: Announcements to attract foreign investors
- State Budgets: Conditional central aid to reduce deficits
- Capital Expenditure: Protected despite state fiscal issues
- Long-Term Gains: Major tax cuts unlikely
Agricultural Productivity
The Survey noted that Indian crop yields continue to lag behind worldwide norms because of climatic and technological limitations. The skewed N:P:K fertilizer ratio, which is caused by excessive urea use, is a significant problem that is lowering production and deteriorating soil health.
The Budget may take into consideration a progressive re-engineering of the fertilizer subsidy scheme in order to improve soil health and increase farm productivity.
Frequently Asked Questions
1. According to the Economic Survey, what are the main external challenges?
Major external risks identified by the Survey include a declining rupee, continued tariffs from the Trump administration, geopolitical concerns, and erratic capital flows. These elements put pressure on India’s balance of payments and have an impact on investor confidence.
2. In what ways will Budget 2026 deal with exports and manufacturing?
By lowering import taxes, extending the Production Linked Incentive (PLI) program to additional industries, and accelerating free trade agreements (FTAs), especially with the US, the budget is probably going to concentrate on increasing goods exports. Export incentives for labor-intensive industries and the relaxation of customs laws are other possible measures.
3. In terms of fiscal restraint, what actions might the government take?
By tying central aid to state performance, Budget 2026 may improve the Special Assistance to States for Capital Investment (SASCI) system. This seeks to ensure that states maintain capital expenditures for growth while reducing revenue deficits.
4. Will enterprises’ cost of capital be considered?
Indeed, plans are anticipated to lower the cost of capital, lessen reliance on bank lending, and expand the corporate bond market. Although large reductions in the capital gains tax are improbable, the budget may possibly provide tax certainty measures to draw in overseas investors.
5. How does the budget intend to increase agricultural output?
The survey emphasizes low agricultural yields brought on by climatic and technological limitations as well as an uneven use of fertilizers. In order to improve agricultural productivity and restore soil health, Budget 2026 may gradually implement changes to the fertilizer subsidy program, including adjusting the N:P:K ratio.
Conclusion
The Economic Survey 2025–2026 lays the groundwork for a budget that prioritizes long-term growth and strategic resilience. Increasing exports, increasing manufacturing competitiveness, maintaining fiscal restraint, lowering capital costs, and raising agricultural production are all top concerns.
In order to achieve sustainable growth and rupee stability in the face of a volatile global environment, Budget 2026 is anticipated to strike a balance between urgent economic challenges and steps to further integrate India into global value chains.
Disclaimer: This article is based on public information from the Economic Survey 2025–26 and is for informational purposes only. It does not constitute financial or investment advice.
