Economic Survey 2025-26: India shines as the world darkens

Paper: GS – III, Subject: Economic, Topic: Economic survey & Budget, Issue: Economic Survey 2025-26.

Context:

The Economic Survey 2025-26 highlights that India is increasingly affected by global geopolitical fragmentation, tightening financial conditions, and capital flow volatility. While India’s macro fundamentals remain strong, external headwinds are intensifying, particularly through declining FDI and volatile FII flows.

Key Takeaways:

Macroeconomic Outlook: “Bright India in a Darker World”:

The Survey positions India as a resilient economic power amidst a global environment defined by geopolitical fractures and uncertainty. While the world faces potential crises, India is projecting stability and upgraded growth.

Key Highlights:

• Growth Upgrade: The medium-term growth outlook has been raised, reflecting confidence in domestic reforms like physical/digital infrastructure and tax simplification.
• Global Risk Analysis: The Survey identifies three specific scenarios for the world in 2026, ranging from “Business as Usual” to a “Worst Case” crisis potentially triggered by an AI bubble burst or geopolitical escalation.
• Rupee Valuation: The Chief Economic Adviser (CEA) argues that the Rupee is “punching below its weight” and is undervalued due to global risk aversion rather than domestic weakness.

Data:

• GDP Forecast: Projected to grow 6.8% – 7.2% in 2026-27. Medium-term outlook raised to 7% (from 6.5%).
• Global Risks: There is a 10-20% probability estimated for a “Worst Case” global crisis, which could be more severe than the 2008 financial crash.
• Currency: The Rupee has weakened by nearly 7% since the start of 2025, described as a “victim of geopolitics.”

India’s domestic fundamentals are strong, but the external environment is increasingly hostile (“drying up of FDI/FII flows”). The economy is insulated but not immune to global shocks.

Governance: Re-examination of the RTI Act:

The Survey proposes a controversial reform to the Right to Information (RTI) Act, 2005. It argues that the Act, while powerful for transparency, has created “governance paralysis” by making officials afraid to document candid opinions.

Key Highlights:

• Deliberative Privacy: The Survey calls for exemptions to protect the “deliberative process” of policy-making. It suggests that fear of public disclosure stifles honest internal debate.
• Ministerial Veto: A proposal to grant ministers the power to veto RTI requests that seek access to brainstorming notes or internal drafts before a final decision is made.
• Misuse of RTI: It notes that the Act is sometimes used for “idle curiosity” or to settle personal scores rather than for public interest.

Data:

• Quote: The Survey states the Act serves as a “tool for idle curiosity” rather than a mechanism to guard against strict governance.
• Comparison: It draws parallels with laws in the US, UK, and South Africa, where “deliberative process” exemptions exist to protect internal government discussions.

The government seeks to balance transparency with efficiency, aiming to protect officials from harassment while ensuring that final decisions remain accountable.

Education: The “PISA-like”(Program for International Student Assessment) Shift

The education sector faces a dual challenge: uneven infrastructure distribution and a curriculum that prioritizes rote learning over critical thinking.

Key Highlights:

• Assessment Reform: The Survey proposes introducing a “PISA-like” assessment for Class 10. This would move away from testing memory to testing the application of knowledge and skills.
• Rural-Urban Divide: There is a stark disparity in access to secondary education between rural and urban areas, which drives high dropout rates.
• Internationalization: A push to “internationalize” the higher education sector to retain talent within India.

Data:

• Access Disparity: Only 17% of rural schools provide secondary education, compared to 38% in urban areas.
• Dropout Reasons: The primary reasons for dropouts remain the need to supplement household income and domestic/care duties.

Merely increasing enrollment is no longer enough. The focus must shift to quality and applicability of education to make the Indian workforce globally competitive.

Health: The Crisis of Digital Addiction:

For the first time, the Economic Survey treats “digital addiction” as a critical public health and economic risk, linking it to rising obesity and mental health issues among the youth.

Key Highlights:

• Screen-Time Epidemic: Excessive screen time is aggravating lifestyle diseases (obesity, diabetes) and mental health disorders (anxiety, depression).
• Regulation Proposals: The Survey suggests “network-level safeguards,” such as differentiated data plans for educational vs. recreational use, to curb non-productive consumption.
• Mandatory Physicality: A call for mandatory physical activity in schools to counter sedentary lifestyles.

Data:

• Usage Stats: 48% of users watch videos online; 40% use email/listen to music; 26% made digital payments.
• Health Impact: “Digital addiction and rising obesity due to consumption of ultra-processed foods” are flagged as key health challenges.

India’s “demographic dividend” is at risk of becoming a “demographic burden” due to poor physical and mental health driven by technology and lifestyle choices.

Agriculture: Food vs. Fuel Debate:

While agriculture ensures food security, the push for renewable energy (Ethanol blending) is creating friction with traditional food crop cultivation.

Key Highlights:

• The Ethanol Dilemma: Expanding area under crops like maize for ethanol production is competing with essential food crops like pulses and oilseeds.
• Growth Slowdown: The agricultural sector is witnessing a growth slowdown after years of robust performance.
• Climate Resilience: The Survey prioritizes adaptation (surviving climate change) over “signalling” (cutting emissions purely for global optics).

Data:

• Growth Rate: Agriculture growth is projected to slow to 3.5% in 2025-26 (down from the decadal average of 4.45%).
• Risk: The Survey warns that ethanol blending has an “impact on food security” and could lead to higher food inflation if not managed.

India must tread carefully to ensure that its energy goals (fuel blending) do not trigger a food crisis or inflation in essential commodities.

Industry & Services: New Growth Engines:

The economy is diversifying, with new sectors like Live Entertainment and AI emerging as significant contributors, while traditional sectors like Aviation face structural issues.

Key Highlights:

• Live Entertainment Boom: The “experience economy” is surging, with concerts and festivals becoming major economic drivers.
• Aviation Duopoly: The Survey flags a “duopoly” in the airline sector (likely Indigo and Air India), warning that lack of competition hurts passenger safety and keeps prices artificially high.
• Critical Minerals: Minerals like lithium and cobalt are identified as “strategic choke points” that India must secure for its energy transition.

Data:

• Entertainment Value: The Live Entertainment sector surpassed ₹10,000 crore in 2024.
• Judiciary Shortfall: The Survey notes a massive shortage of judges 22 judges per 10 lakh people slowing down dispute resolution and contract enforcement.

While the services sector cushions the economy, structural monopolies in aviation and judicial bottlenecks are hindering full potential.

Urbanization: “Unfinished Promise”:

India’s cities are the engines of growth but are failing to provide a quality of life commensurate with their economic contribution.

Key Highlights:

• Urban Decay: Cities are plagued by long commutes, pollution, and uneven access to basic services.
• Financial Autonomy: Local urban bodies (municipalities) lack the financial autonomy to plan and execute necessary infrastructure projects.
• Social Capital: A decline in “civic norms” and shared responsibility for public spaces is noted.

Data:

• Description: Indian cities are described as sites of “daily strain” rather than efficiency.
• Cause: The issues stem from “persistent supply-side constraints in land, housing, and mobility.”

Urbanization in India has been about expansion (growing bigger) rather than evolution (getting better). The next phase of growth requires fixing the “intangible foundations” of city life.

Economic Survey 2025-26: Key Data & Statistics:

Source: (The Indian Express, The Hindu)

La Excellence IAS Academy, the best IAS coaching in Hyderabad, known for delivering quality content and conceptual clarity for UPSC 2026 preparation.

FOLLOW US ON:

◉ YouTube : https://www.youtube.com/@CivilsPrepTeam

◉ Facebook: https://www.facebook.com/LaExcellenceIAS

◉ Instagram: https://www.instagram.com/laexcellenceiasacademy/

GET IN TOUCH:

Contact us at info@laex.in, https://laex.in/contact-us/

or Call us @ +91 9052 29 2929, +91 9052 99 2929, +91 9154 24 2140

OUR BRANCHES:
Head Office: H No: 1-10-225A, Beside AEVA Fertility Center, Ashok Nagar Extension, VV Giri Nagar, Ashok Nagar, Hyderabad, 500020

Madhapur: Flat no: 301, survey no 58-60, Guttala begumpet Madhapur metro pillar: 1524,  Rangareddy Hyderabad, Telangana 500081

Bangalore: Plot No: 99, 2nd floor, 80 Feet Road, Beside Poorvika Mobiles, Chandra Layout, Attiguppe, Near Vijaya Nagara, Bengaluru, 560040