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Informist, Thursday, Jan. 29, 2026

MUMBAI – Following is a compilation of stories on Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament by Finance Minister Nirmala Sitharaman, on Thursday:

GIG ECONOMY POLICY SHOULD GIVE WORKERS CHOICE, MINIMUM EARNINGS

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The Economic Survey for 2025-26 (Apr-Mar), tabled in the Parliament Thursday, has batted for a gig-economy policy that would provide workers "real choice", minimum per-hour earnings, or per-task earnings. 

"Platforms have become essential gig-market infrastructure for finding workers and work. This concentration of power raises concerns over fees, algorithms, and worker protections," the survey said. "Policy should address this through competition rules, data access, and algorithmic transparency, while reorganising the social contract so that gig work benefits workers more fairly."

The gig economy, which includes delivery, ridesharing, and freelancing, has seen structural growth since the COVID-19 pandemic. The sector had around 12 million workers in FY25, up from 7.7 million in FY21, according to the Indian Staffing Federation. This sector now accounts for over 2% of India's total workforce, and the growth of gig workers outpaces overall employment. Non-agricultural gigs are projected to constitute 6.7% of the workforce by FY30, contributing INR 2.35 trillion to GDP.

A gig-economy policy can set minimum per-hour or per-task earnings, including for waiting time, encourage formal employment, and raise incomes for low and medium-skilled gig workers, the survey said. Gig workers are often classified as freelancers, independent contractors, or platform partners, making it difficult to apply conventional labour-market definitions and regulations, the survey said. "When classified this way, gig workers lack employment benefits such as social security, paid leave, minimum hours, and health coverage, resulting in poor job security and lower incomes."

There is a growing focus on expanding social security, income protection, and grievance redressal mechanisms for gig and platform workers to safeguard their well-being, the survey said. "Amid these developments, the effective implementation of Labour Codes would play a key role in supporting formal employment and improving security for women and gig workers."

Another challenge for gig workers is limited access to credit and a lack of assets needed to move into better gigs. Many gig workers are unable to upgrade from low and medium-skilled gigs because they lack tools such as a motorcycle, car, or specialised equipment, the survey said. "Encouraging platforms and employers to co-invest in assets and training could help workers progress into more secure, higher-quality jobs." The survey said the market should be encouraged to offer more flexible, agile financial products that take into account the income patterns of gig workers.  End

Reported by Shubham Rana

Edited by Saji George Titus

FDI INTO INDIA REMAINS BELOW POTENTIAL, NEEDS PROACTIVE REFORMS

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Foreign direct investments into India remain below their potential, especially for infrastructure needs, and sustaining the inflows is a challenge in an environment of heightened global volatility, according to the Economic Survey for 2025-26 (Apr-Mar) tabled in the Parliament Thursday. This underscores the need for pro-active reforms.

In Apr-Nov, gross FDI inflows into India rose to $64.7 billion from $55.8 billion in Apr-Nov 2024, as per latest Reserve Bank of India data. In 2024-25 (Apr-Mar), gross FDI inflows into India were $81.0 billion, an increase of 13% from $71.3 billion in FY24.

The multi-pronged approach to boost FDI inflows should involve developing a targeted strategy that identifies a specific set of global value chain anchors and establishes a state apparatus that collaborates directly with them as partners, according to the Economic Survey, authored by a team led by Chief Economic Adviser V. Anantha Nageswaran.

"The direct engagement will help resolve cross-agency issues and provide customised and time-bound solutions," it said. "Additionally, it is crucial for India not only to offer compelling incentives but also to ensure these incentives are reliably implemented." 

Further, creating a task force to engage top global companies and promote India's advantages - stability, macroeconomic strength, sustained growth and market size - could boost FDI, especially in targeted sectors, it said, adding that proactive diplomacy, highlighting these strengths, can help offset tariff challenges.

The Economic Survey highlighted that signing of free trade agreements with countries bodes well for India's FDI inflows, provided these agreements are effectively implemented. 

Reported by Pratiksha

Edited by Ashish Shirke

NEED PRODUCTIVITY-, EXPORT-LED GROWTH TO LOWER COST OF CAPITAL

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Growth patterns that rely disproportionately on domestic demand and credit-enabled consumption do not materially strengthen the formation of surpluses that reduce the cost of capital in an economy, the Economic Survey for 2025-26 (Apr-Mar) said. Instead, the creation of a domestic savings pool from productivity gains in industry and higher exports will do more to bring down India's long-term interest rates, according to the document tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday. 

"The durable route to a lower cost of capital is therefore inseparable from a growth pattern anchored in higher productivity, enhanced manufacturing competitiveness, sustained export growth, and the gradual transition from structural savings deficit to structural savings strength," the Survey said. "Financial deepening can support and accelerate this transition, but it cannot substitute for it."

The Survey, authored by a team led by Chief Economic Adviser to the government, V. Anantha Nageswaran, backed a series of real economy reforms that would reduce the risk premium associated with the economy's firms. These policies would support firm-level scale and deregulation, improve logistics, infrastrcture and trade facilitation, deepen technological capabilities and research and development. Ultimately, these would enable India's sustained participation in global supply chains that would strengthen productivity and margins in manufacturing.

Financial sector reforms can reduce intermediation costs and improve capital allocation but are most effective in an environment where domestic savings are increasing and reliance on external capital is limited by export-led growth. In a setting where domestic savings are short, consumption-led growth sustains a weaker currency and rollover-risk premium, which, in turn, fails to attract foreign investment, the Survey said. 

India's high cost of capital is widely seen as a constraint on private investment and long-term growth, averaging 7.61% between 1995 and 2025. Long-run interest rates are influenced more by the current account balance improving, with the impact more than double the gains from a similar increase in financial market depth or GDP growth, the Survey said. The government's first advance estimate of India's GDP growth in 2025-26 (Apr-Mar) pegs private consumption to make up 56.3% of the economy, with only 33.8% coming from gross fixed capital formation, a proxy for investment. 

"Greater reliance on foreign capital can bridge temporary gaps but, when persistent, tends to elevate risk premia and narrow policy space—outcomes that are already reflected in the pricing of capital in CAD (current account deficit) economies," the Survey said.

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

INFLATION LIKELY TO RISE IN FY27 BUT UNLIKELY TO BE A CONCERN

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India's inflation is likely to rise in the next financial year but it may not be a concern on account of favourable supply-side conditions and the pass-through effect of goods and services tax rate rationalisation, the Economic Survey for 2025-26 (Apr-Mar), released Thursday, said. India's retail inflation averaged 1.3% in Apr-Dec, the lowest in the current CPI series.

"Looking ahead, the outlook remains favourable, with projections of inflation staying within target ranges, supported by strong agricultural output, stable global commodity prices, and continued policy vigilance," the Economic Survey said. The author of the survey, Chief Economic Adviser to the Government V. Anantha Nageswaran, also reiterated that he expected the benign inflation trend to continue in FY27. The Reserve Bank of India has projected CPI inflation at 2% for FY26, and 3.9% and 4.0% for Apr-Jun and Jul-Sept, respectively.

"However, risks from currency fluctuations, base metal price surges and global uncertainties persist, warranting ongoing monitoring and adaptive policy responses," the survey said. The rupee, which has fallen over 2% in January alone, closed at a record low of 91.9550 on Thursday.

The trajectory of India's core inflation also needs close monitoring, as prices of precious metals like gold and silver have reached lifetime highs amid heightened global uncertainty and strong safe-haven demand.

Food inflation, on other hand, is likely to stay at moderate levels in the upcoming months. "The below-normal temperature experienced through most of the months in 2025 coupled with above-normal monsoon, which augmented reservoir levels, has favourably influenced kharif harvests, created strong sowing momentum in the ongoing Rabi season and improved the stock position of foodgrains," the survey said

The forthcoming rebasing of the CPI series in the coming year will also have implications for inflation assessment and warrant careful interpretation of price dynamics, the survey said. The statistics ministry will also release the CPI with 2024 as the base year from February.

Reported by Krity Ambey

Edited by Akul Nishant Akhoury

INDIA DIVERSIFYING ITS ENERGY SOURCES, BUT CHALLENGES REMAIN

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India is adopting a multifaceted approach to mitigate global warming by diversifying its energy sources and increasing the share of non-fossil fuels, but challenges such as want of investments remain, the Economic Survey for 2025-26 (Apr-Mar) has said.

The country has already surpassed the goal of 50% installed power capacity from non-fossil fuel sources, which stood at 51.93% at the end of December, supported by fast annual additions of renewable energy capacity, the Survey, released Thursday, said. During Apr-Dec, a total of 38.61 GW of renewable energy capacity has been installed, which includes 30.16 GW of solar power, 4.47 GW of wind power, 0.03 GW of bio-power and 3.24 GW of hydro power.

These strategies align with the nation's development and sustainability objectives. A comprehensive range of policies has been implemented to achieve the 2030 Nationally Determined Contributions targets.

According to the International Renewable Energy Agency's Renewable Energy Statistics 2025, India now ranks fourth globally in total installed renewable energy capacity, trailing behind China, the US, and Brazil.

"Despite the progress in expanding non-fossil fuel energy, challenges remain. The renewable energy systems of solar and wind are highly material-intensive and require capital-intensive energy storage technologies for integrating renewable energy into the energy grid," the Survey said.

"Material and storage requirements represent the two roadblocks to greater utilisation of these energy sources," it said. Material requirement extends beyond access to critical minerals to mining and energy needs for material processing, it added.

"With respect to energy technology, the challenge is not just the need for new technologies, but also the substantial investment requirements," the survey said. 

Reported by Asim Khan

Edited by Deepshikha Bhardwaj

DEREGULATION-II EXPANDS COMPLIANCE REDUCTION FOR PRIORITY AREAS

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The phase II of the deregulation initiative rolled out in January this year has expanded compliance reduction for additional priority areas such as land, building and construction, utilities and permissions, environment, education, health, labour, and overarching reforms, said the Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday. The current phase of deregulation demonstrates how disciplined removal of friction can strengthen state capacity at scale, said the survey.

It said the outcomes of the compliance reduction and deregulation initiative were visible in reduced compliance burdens, faster approvals, greater reliance on digital processes, and improved predictability for businesses. Outcomes of phase I of deregulation were encouraging, whose experience illustrated a broader lesson that state capacity is built not only through new institutions or additional controls, but through disciplined removal of frictions that impede productive activity, said the survey.

Several states and Union territories have also undertaken innovative reforms for deregulation that go beyond the common reform templates, tailored to their specific administrative, economic and spatial contexts, the survey said. This demonstrates how the compliance reduction agenda has encouraged states to internalise deregulation as a continuous governance process rather than a checklist exercise, said the survey.

Showing some examples, the survey said that in Andhra Pradesh and Uttarakhand, the requirement for land conversion or change in land use has been eliminated for specific categories, significantly reducing procedural delays. In Assam, Jammu and Kashmir, Odisha, Puducherry, and Tripura, negative lists have been introduced for mixed land use zones, whereby all activities are permitted unless explicitly prohibited, replacing earlier prescriptive zoning frameworks, said the survey. These measures have reduced land loss, enabled higher utilisation of urban land, and facilitated project execution, particularly for industrial and commercial developments, it added.

According to the survey, several states have expanded the use of third-party inspections and self-certification to reduce regulatory bottlenecks. Chhattisgarh, Mizoram, Rajasthan, Tripura, and Uttar Pradesh have introduced third-party inspection mechanisms for building plan approvals, said the survey. For environmental clearances, the Andaman and Nicobar Islands, Andhra Pradesh, Goa, Tamil Nadu, and Uttarakhand have enabled self-certification and third-party certification for consent to operate, reducing dependence on routine departmental inspections, said the survey. These reforms have reduced the fear of penal action for procedural non-compliance and reinforced trust-based regulation, it said.

The document said that deregulation, when pursued as a continuous and coordinated governance process, is not a retreat of the state but a strengthening of it. By simplifying rules, clarifying responsibilities, and making processes predictable and time-bound, administrative effort is shifted away from low-value policing toward problem-solving, monitoring, and execution, said the survey. In this sense, deregulation becomes not only a pro-business reform but a mechanism for building state capacity itself, the survey said.

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

INDIA NEEDS DEEPER CORP BOND MARKET TO FINANCE SUSTAINED GROWTH

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To finance sustained growth, India must strengthen its long-term capital markets, according to the Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday. The Survey highlighted that corporate bond markets remain shallow and illiquid, dominated by top-rated issuers, while securitisation is limited and municipal bonds are underdeveloped. Pension and insurance funds also remain conservative investors due to regulatory and cultural inertia.

"Institutional investors are shown to exhibit structural preferences influenced by return profiles, risk assessments, regulatory incentives, and prevailing market liquidity conditions," the Economic Survey said. "As a result, they tend to favour equities and government securities over corporate bonds. This trend may be contributing to the constraining of the corporate bond market's growth and development."

The Survey recommends several reforms to address these barriers, including rationalising tax treatment of debt instruments and creating credit enhancement facilities for lower-rated issuers. 

Despite the recent progress, a significant potential remains untapped in the country compared to global peers. South Korea's corporate bond market is 79% of its GDP, it is 54% of its GDP in Malaysia, and 38% in China, while India's corporate bond market remains underdeveloped, accounting for around 16-17% of GDP.

Furthermore, India's debt market is skewed towards highly rated borrowers, 'AAA' or 'AA' rated, which accounts for 85-90% of bond issuances. In contrast, the US presents a more liquid and mature corporate debt market catering to various segments. The US has less than 5% of its bond issuances from 'AAA'-rated categories, with over 60% of its issuances in the 'A-' and 'BBB-' rated categories. In India, with the dominance of private placements, public offerings remain limited, deterring access for small firms. 

Rationales also include standardising securitisation structures and disclosures. "A well-developed corporate bond market is indispensable to India's financial system and its path toward becoming a Viksit Bharat by 2047," the Economic Survey said. "Such a market channels institutional and household savings into productive sectors, strengthens efficient price discovery through a robust yield curve and supports the development of critical risk management instruments such as credit derivatives and securitisation."

Further, it also suggests building municipal financial capacity and pooled bond mechanisms, revising investment guidelines for long-term funds, and strengthening financial market infrastructure and insolvency systems, according to the Survey. "Such reforms would supply the scale and maturity needed for infrastructure and climate financing while lowering the economy's cost of capital," it said.

Building a robust debt capital market needs market players which includes issuers, investors, arrangers, and rating agencies - to act as market-builders. They must focus on boosting transparency, pricing risk accurately beyond just 'AAA'-rated bonds, and keeping financial innovation standardised, according to the Economic Survey.

Further, the Survey highlighted that a deep corporate bond market boosts financial stability by reducing systemic concentration risk and dependence on bank financing. It diversifies funding sources, enabling banks to focus on priority sectors like rural credit, infrastructure, and micro, small, and medium enterprises, promoting financial inclusion and lowering fragility. "Additionally, a vibrant bond market helps to lower borrowing costs through competitive pricing and improved liquidity," the Survey said.

In volume terms, India's corporate bond market has showed strong growth, with outstanding issuances increasing to INR 53.6 trillion in FY25 from INR 17.5 trillion in FY15, growing with an annual rate of approximately 12%. In FY25, the highest-ever fresh issuances were recorded, totalling INR 9.9 trillion. In FY26, the debt market accounted for over 63% of total resource mobilisation from the primary market in Apr-Dec. Private placements accounted for over 99% of total resources mobilised through the bond market, and remained the preferred mode.

Major issuers in the corporate debt market include public sector undertakings, public financial institutions, and banks. As of Dec. 31, the market comprised 6,351 issuers with a total of 29,638 instruments outstanding. The principal investor base consists of banks, insurance companies, pension funds, mutual funds, and non-banking financial companies, accoridng to the Economic Survey.

The daily average secondary market volume ranges from INR 70 billion to INR 100 billion. Only a small group of institutional investors participate in the primary markets, which limits the supply of bonds available for trading in the secondary market. Initiatives by the government and the Securities and Exchange Board of India to deepen the bond market helped corporate bond issuances hit INR 6.8 trillion by the end of December, according to the Economic Survey.  

Reported by Vaishali Tyagi

Edited by Tanima Banerjee

CHANNELING HOUSEHOLD SAVINGS INTO DEBT MARKET NEXT LOGICAL STEP

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In the post-pandemic era, a "decisive inflexion" was seen in household savings flowing into equity markets, but participation in debt, specifically market-based debt instruments, has not kept pace with the significant reorientation of household savings towards equities, the Economic Survey for 2025-26 (Apr-Mar) said Thursday. "Beyond equities, the development of debt-linked instrument markets is a logical next step towards achieving balanced, diversified portfolios and meeting long-term financial goals," it said.

"A well-diversified portfolio should include adequate exposure across a broad range of asset classes," the Survey, authored by a team led by Chief Economic Adviser V. Anantha Nageswaran, said. 

Making a case for deepening the corporate debt market, the survey said that such a market channels institutional and household savings into productive sectors, strengthens efficient price discovery through a robust yield curve and supports the development of critical risk management instruments such as credit derivatives and securitisation. However, retail engagement with corporate bonds and debt-oriented investment products remains limited, resulting in debt securities comprising a small portion of household financial assets, it said. 

This limited participation by households in market-based debt instruments is mirrored in the overall shallow depth of India's corporate bond market, the survey said. "India's corporate bond market remains underdeveloped, accounting for around 16-17% of GDP, compared with the equity market capitalisation of over 130% of GDP."

"The household ownership share of deposits has decreased, while that of pension and insurance assets has remained almost unchanged over the period from FY19 to FY24," according to the survey. "Over the past five years, cumulative inflows by domestic investors into the equity markets have been substantially higher than from foreign investors," it added. "This shift highlights the increasing ability of domestic savings to support equity markets, stabilise the market, and mitigate the volatility associated with external capital flows."

The survey also noted that a deep corporate bond market reduces systemic concentration risk and dependence on bank-dominated financing, thereby strengthening overall financial stability. 

Reported by Priyasmita Dutta

Edited by Saji George Titus

INVESTORS' FOCUS ON GENERAL GOVT DEBT DRIVING UP GILT YIELDS

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The increase in investor focus on general government debt, counting both central and state government issuances, is driving up sovereign bond yields, the Economic Survey for 2025-26 (Apr-Mar) said. India's benchmark 10-year gilt yield is 6.7%, compared with 6.3% for Indonesia, which has also been rated 'BBB' by S&P Global Ratings, the document released Thursday said.

"With Indian government bonds now globally indexed and investors increasingly assessing general-government finances, weak fiscal discipline at the State level can no longer be treated as locally contained—it increasingly affects the cost of sovereign borrowing," the Survey said. "States' fiscal priorities, perhaps, are casting a shadow on the sovereign's borrowing cost, as investors focus on the fiscal parameters of the general government rather than just those of the Union government."

India's fully-accessible route government bonds have been included in emerging market indices operated by JP Morgan, Bloomberg and FTSE Russell since 2024. Both Fitch Ratings and Moody's Ratings rate India a notch lower than S&P Global, at the lowest rung of investment grade, due to its high general government debt levels at about 80% of GDP as of March 2025.

States' fundraising through bonds is scheduled to rise to around INR 12.5 trillion in FY26, compared with an actual issuance of INR 10.7 trillion in FY25, which is seen increasing state debt-to-states GDP. Meanwhile, the Centre has targetted a debt-to-GDP ratio of 50%, plus or minus 1 percentage point, by March 2031, from 56.1% projected as on March 2025. The Survey said the government's fiscal trajectory stands out in a global environment where sovereign indebtedness is rising. The Centre's high interest costs – at over one-third of its net revenues in FY25 and projected for FY26 – is also likely to be contained through active debt management with bond buyback and gilt switch operations.

"However, emerging trends in State-level debt and deficits underscore the need for continued calibration," the Survey said.  

Reported by Aaryan Khanna

Edited by Tanima Banerjee

MGNREGA HAD RUN ITS COURSE, WORK DEMAND DECLINED

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The Mahatma Gandhi National Rural Employment Guarantee Scheme served as a critical safety net for rural households for a long time, but recent trends revealed a noticeable decline in work demand under the scheme, the Economic Survey for the financial year 2025-26 (Apr-Mar) said.

The survey cited data showing that person days generated have declined to approximately 1.84 billion as of Dec. 31, from a peak of 3.89 billion, a decline of around 53%. "This decline in MGNREGS demand coincides with a decrease in rural unemployment, from 3.3% in 2020-21 to 2.5% in 2023-24, suggesting that many rural households may be accessing non-farm or other non-MGNREGS work," the survey said.  

These developments highlight a marked improvement in the rural economy driven by strong macroeconomic fundamentals and a reduced dependence on MNREGS as a source of livelihood, it said.

The Congress party, which led the United Progressive Alliance government that enacted the scheme in 2005, has been up in arms against the Narendra Modi government for replacing the MGNREGA with a new legislation called the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act. While the Congress has been criticising the government for dropping Mahatma Gandhi's name from the legislation, other opposition parties have expressed concerns over the increased financial burden on the states under the new law.

While admitting various achievements of MGNREGS over the years, the Economic Survey said several emerging factors have prompted a re-examination of the design and objectives of employment guarantee programmes. Since its enactment in 2005, the MGNREGS has provided wage employment, stabilised rural incomes, and created basic infrastructure, offering at least 100 days of guaranteed unskilled work to rural households, it noted.

"Alongside these gains, deeper structural issues persisted... Misappropriation accumulated over time, and only a small proportion of households completed the full 100 days of employment post-pandemic, indicating that while delivery systems improved, the overall architecture of MGNREGS has reached its limits and warrants reassessment in light of evolving rural realities," the survey said.

Besides, it added, monitoring in several states revealed gaps, including work not being done on the ground, expenditure not matching physical progress, the use of machines in labour-intensive work, and frequent bypassing of digital attendance systems.

"Against this backdrop, the government has enacted the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025... The new Act builds on past improvements while addressing their shortcomings through a modern, accountable, and infrastructure-focused framework," it said. 

Reported by Asim Khan

Edited by Saji George Titus

DOES NOT HURT TO HAVE UNDERVALUED RUPEE AMID HIGH US TARIFFS

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The rupee's present valuation does not accurately reflect India's economic fundamentals, the Economic Survey for 2025-26 (Apr-Mar) said Thursday. However, it does not hurt to have an undervalued rupee, as it somewhat neutralises the impact of US tariffs on Indian exports, it said.

"In other words, the rupee, therefore, is punching below its weight," the Survey, authored by a team led by Chief Economic Adviser V. Anantha Nageswaran, said. "Of course, it does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now."

The rupee has depreciated over 2% against the dollar so far this year, after falling almost 5% last year, owing to a prolonged delay in clinching a trade deal between India and the US, as the latter slapped hefty 50% tariffs on the former. The rupee's real effective exchange rate index fell to a near 12-year low of 95.30 in December, indicating the Indian currency is undervalued by nearly 5%.

The Survey said that India and the US are expected to conclude the ongoing negotiations for the much-touted bilateral trade agreement during the year. To be sure, it did not specify what "during the year" denotes – FY26, 2026, or FY27.

However, the Survey flagged that an undervalued rupee does cause investors to pause, saying "investor reluctance to commit to India warrants examination." In 2025, foreign portfolio investors withdrew $10.68 billion worth of funds from domestic market, on a net basis, the most in three years. The streak has continued this year as well, with net FPI outflow worth $3.3 billion from domestic markets seen so far. The depreciation of the Indian currency could also pave the way for imported inflation, it said.

The Survey said that a robust and stable currency can only be achieved through export competitiveness. "History demonstrates that countries with sustained manufacturing export success are those that have maintained hard currency status, characterised by currency stability and strength," it said.

Over the medium to long term, the Survey expects the exchange rate dynamics to be guided by structural fundamentals, such as productivity gains, export diversification towards higher-value goods and services, deeper integration into global value chains, and a stable policy environment rather than short-term fluctuations.

Reported by Pratiksha

Edited by Tanima Banerjee

GROWTH OF MICROFIN SECTOR HINGES ON RESPONSIBLE LENDING PRACTICES

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The microfinance sector grew significantly in the past decade and a continuation of this growth would largely depend on responsible lending practices by the microfinance lenders, according to the Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday.

Moreover, the growth of this sector will depend on the strengthening of the enabling infrastructure including tools to assess creditworthiness and continued strengthening of institutional resilience to manage cyclical volatility, the survey said.

Over the past decade, the microfinance sector gained active borrowers, nearly doubling from 33 million in FY14 to 62.7 million in FY25. During this period, the gross loan portfolio of microfinance institutions rose nearly seven times from INR 335.17 billion in FY14 to INR 2.38 trillion in FY25.

At present, microfinance institutions do not offer tailored credit with differential pricing for different category of borrowers, the survey said. Lending by these financial institutions is likely to become more competitive when multiple microfinance institutions serve each borrower category.

Moreover, these institutions have limited visibility over certain types of loans as gold loans, agriculture loans, and cooperative society credit, which constrains the ability of these institutions to calculate the accurate repayment obligations of the borrower while availing credit, the survey said.

The Reserve Bank of India reduced the minimum qualifying assets to 60% from 75% of the total assets which will likely allow microfinance institutions to manage their portfolio risks more effectively, the survey said.

"In response to the prompt regulatory action, stress in the MFI sector has begun to temper with a reduction in risky assets on a quarterly basis between June quarter FY26 and September quarter FY26. Other indicators, such as loan disbursements and solvency ratios, showed a steady improvement across the same period." 

The microfinance sector saw a fall of 14% in outstanding loans in FY25 because of the sector's overexposure.

On the financial inclusion front, regulatory innovations through digital infrastructure and government-led initiatives resulted in narrowing of the gaps in financial access over the past decade, the survey said. Among the government-led initiatives, 550 million accounts were opened as of March 2025 under the Pradhan Mantri Jan Dhan Yojana.

The Stand-Up India Scheme offered bank loans between INR 1 million and INR 10 million which led to greenfield establishments. Other similar initiatives led to collateral-free working capital loans and funds to micro and small enterprises in manufacturing, trading, services, and allied agricultural activities which also aided financial inclusion. 

Reported by Janwee Prajapati

Edited by Ashish Shirke

TWEAK 'GOVT COMPANY' DEFINITION TO RAISE DIVESTMENT RECEIPTS

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The government can amend the Companies Act and revise the definition of "government company" to allow stake sales beyond 51% while retaining "government company" status, the Economic Survey for 2025-26 (Apr-Mar) said Thursday. Receipts from disinvestment can also be strengthened by reducing government equity in certain public sector undertakings beyond the minimum public shareholding norms, guided by market conditions and enterprise-specific factors, the survey, tabled in Parliament, said.

As per the Securities and Exchange Board of India's Securities Contract (Regulation) Rules, all listed companies, including public sector companies, must have a minimum public shareholding of 25%.

Currently, in about 30% of listed PSUs, government shareholding is already below 60%, limiting further disinvestment through the offer-for-sale route, since the government must hold at least 51% stake in the company for it be a state-owned entity. The survey, authored by a team led by Chief Economic Adviser V. Anantha Nageswaran, said that since effective control in a company requires only about a 26% stake, the government could consider amending the definition of "government company" under the Companies Act, limited to listed entities, to allow them to remain as government companies with a minimum of 26% ownership, thereby retaining special resolution rights, while enabling the government to monetise its stake.

Alternatively, if the objective is eventual privatisation of a PSU, the government could continue phased offer-for-sale below 51% and even towards full exit, without changing the legal definition of "government company", the survey suggested. "This would enable CPSEs to function post-disinvestment as professionally managed entities with dispersed ownership, clear governance standards, and transparent succession frameworks," it said. 

These suggestions come as the government has seen limited success in its disinvestment plan. Lower revenue from non-debt capital receipts impacts the government's fiscal math. 

The Economic Survey also noted that a portion of disinvestment receipts could be earmarked for strategic investments in emerging technology and innovation-driven companies through professionally managed platforms such as the National Investment and Infrastructure Fund, thereby recycling public capital toward future growth sectors. "This will also ensure a steady stream of disinvestment receipts into the future," the survey said. 

Reported by Priyasmita Dutta

Edited by Saji George Titus

TRADE NEGOTIATIONS WITH US EXPECTED TO CONCLUDE DURING THE YEAR

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India and the US are expected to conclude the ongoing negotiations for the much-touted bilateral trade agreement during the year, the Economic Survey for 2025-26 (Apr-Mar), tabled by Finance Minister Nirmala Sitharaman in Parliament Thursday, said. This could help reduce uncertainty on the external front, which faces heat from US' steep tariffs, heightened uncertainties and increased trade fragmentation. To be sure, the Survey did not specify what "during the year" denotes – FY26, 2026, or FY27. 

The US--India's top export destination--in August imposed 50% tariff on goods imported from India, including a punitive tariff of 25% for New Delhi's continued purchases of crude oil from Russia. India has been batting for the trade agreement to shield its huge exports from the 50% tariff, though the trajectory of India–US trade talks has fluctuated significantly over the past 10 months.

"The global economic landscape is becoming increasingly unpredictable, driven by tariff increases, supply chain adjustments, and higher regulatory hurdles," the Economic Survey, authored by a team led by Chief Economic Adviser V. Anantha Nageswaran, said. "For Indian industries, the current wave of US tariff implementations and stricter non-tariff barriers present a significant challenge, particularly for export-oriented sectors," it said. 

With energy being a key bone of contention in the India-US trade deal, the Survey said that a notable increase in the diversity of countries from which India imports crude oil has been observed. "In FY26 (Apr-Nov), crude oil imports from Libya, Egypt, Brazil, the US and Brunei increased significantly compared to the same period in FY25, while those from Russia, Saudi Arabia, Iraq and Venezuela declined," it said. 

So far, Indian exports to the US have held up despite steep duties, rising 9.8% on year to $65.88 billion in Apr–Dec. But in the absence of a trade deal, India may face duties of up to 500% if the US Congress enacts the bipartisan sanctions bill targeting Russia and its trading partners.

As such, India's merchandise exports rose to $330.29 billion during the first nine months of FY26 from $322.41 billion a year ago. India imported goods worth $578.61 billion in Apr-Dec, up from $546.36 billion in the same period last year. Trade deficit during Apr-Dec was $248.32 billion against $223.95 billion a year ago.

According to the Survey, to sustain the momentum in India's trade performance amidst global uncertainty, the country is actively pursuing a diversified trade strategy, including diversification of export destinations. "Sustaining export momentum will require diversification towards higher-value, more sophisticated products and new destinations," the Survey suggested.

In this, an expanding network of free trade agreements supports India's trade strategy by offering reliable market access amid global trade uncertainty. "These agreements enable export-focused firms to boost production and become more integrated into GVC (global value chain)," it said. "Furthermore, by exposing firms to international competition, FTAs improve export competitiveness, encouraging firms to prioritise productivity and reliability over reliance on access-based benefits."

India, on Monday, concluded trade negotiation with the European Union, a large export market. The deal offered to cut tariffs on over 95% of export value for both sides. With these provisions, the India-EU agreement--termed "mother of all deals" by European Commission President Ursula von der Leyen--aims to double bilateral trade by 2032.

The Survey also noted that enhancements in export competitiveness increasingly depend on state-level implementation, as states play a vital role in providing the infrastructure, regulatory certainty, and administrative coordination that export-focused firms need. 

Reported by Priyasmita Dutta

Edited by Tanima Banerjee

NCLT TO TAKE 10 YRS FOR PENDING CASES; NEED FASTER IBC TIMELINES

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Noting that it will take nearly 10 years for various benches of the National Company Law Tribunal to clear 30,600 pending cases at the current disposal rate, the Economic Survey 2025-26 (Apr-Mar) tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday called for enhancing the effectiveness of the insolvency framework to accelerate recovery timelines. Such extended timelines can trigger value erosion by way of deterioration in assets, departure of employees, shift of customers to competitors, and break down in relationship with suppliers, the document stated.

The Insolvency and Bankruptcy Code mandates insolvency resolution completion within 330 days, including extensions. However, the actual average duration was 713 days overall and 853 days for cases closed in the financial year 2024-25. This represents a deviation of over 150% from the statutory limit, said the survey.

According to the survey, there lies an institutional constraint both at the level of tribunals as well as the level of resolution professionals. Only 30 National Company Law Tribunal benches handle cases across the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013, and resolution professionals are also in short number, said the survey. Of 4,527 registered resolution professionals, only 2,198 hold active authorisation for assignment, it added.

The survey highlighted low performance in the pre-packaged insolvency resolution process that was introduced in 2021 to provide simpler, faster, and less costly resolution. The survey said that the pre-packaged insolvency resolution process has seen only 14 insolvency admissions in four years. The reasons behind the low take-up include procedural complexity that is inappropriate for the target segment, lack of awareness among micro, small, medium enterprises promoters and lenders, trust deficits regarding debtor-led processes, and the inability of small enterprises to fund the process, said the survey.

Further, the survey quoted S&P Global Ratings as saying that average recovery rates have improved to around 30% from 15-20% under the pre-insolvency law regime, while resolution timelines have reduced from six to eight years to about two years. Over time, the resolution-to-liquidation ratio has improved from 20% in FY18 to 91% in FY25, according to the survey.

The government had introduced the Insolvency and Bankruptcy Amendment Bill, 2025, in August, which proposed a range of measures aimed at addressing procedural delays within the system. It also proposed a framework for cross-border insolvency proceedings. The Bill was referred to a select committee, which had submitted its report in December. While the previous decade offered testament to Insolvency and Bankruptcy Code's legal framework and design, the next phase of the insolvency law should combine process reform with a rapid scaling of capacity, the Economic Survey said. 

Reported by Surya Tripathi

Edited by Nishant Maher

GST EXEMPTION TO BOOST INSURANCE SECTOR'S GROWTH

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The goods and services tax exemption on life insurance and individual health insurance policies introduced in September is likely to boost the insurance sector's growth, the Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament Thursday, said.

Further, reforms such as increasing the foreign direct investment limit in insurance to 100% and other amendments introduced through the ‘Sabka Bima, Sabki Suraksha Act, 2025' are likely to get more players into the sector, helping its expansion, the survey said.  The non-life insurance sector has reported a strong growth, driven by demand for health insurance, mandatory motor insurance requirements, and increasing asset ownership.

Assets under management of insurance companies reached INR 74.4 trillion in FY25, with total premium income rising to INR 11.9 trillion in FY25 from INR 8.3 trillion in FY21.

Life insurance dominates the sector, accounting for 91% of total AUM and 75% of premium income. The survey also observed structural shifts in the non-life insurance segment, with health insurance overtaking motor insurance in the leading business line.

Life insurers paid benefits totalling INR 6.3 trillion in FY25, while the non-life sector's net incurred claims rose by over 70% from FY21 to INR 1.9 trillion in FY25.

However, despite progress in the life and non-life segments, insurance penetration remains low, leading to a significant protection gap and leaving many households and MSMEs outside insurance protection. The survey has identified challenges such as rapid escalation in healthcare costs, rising climate-related risks, and an increase in cyber-risk incidents.

"A large proportion of households and MSMEs continue to remain uninsured, with insurance adoption uneven across regions and income groups. Closing this protection gap is critical to strengthening household financial security and reducing vulnerability to financial shocks. Achieving this will require the insurance sector to grow at a substantially faster pace than nominal GDP," it said.

Other challenges, such as rising acquisition and administrative costs, have led to increasing operating expenses, and even with growing digitalisation, customer acquisition is largely dependent on expensive intermediary networks, it said.

"Most visible implication of the high-cost regime is the widening divergence between insurance coverage depth and breadth. While insurance density has risen steadily to $97 in FY25, reflecting higher spending by households already integrated into the financial system, insurance penetration has stagnated and declined to 3.7%, the Economic Survey said.

The survey highlighted key reforms introduced by Sabka Bima Sabki Raksha, such as one-time registration of insurance intermediaries and raising the threshold for Insurance Regulatory and Development Authority of India approval before the transfer of shares of paid-up equity capital to 5% from 1%. To improve policyholders' protection, the 2025 Act has raised the penalty for insurers that contravene the Act to INR 100 million from INR 10 million.  

Reported by Suryash Kumar

Edited by Saji George Titus

INDIA WELL-POSITIONED TO DEVELOP FUTURE-READY PENSION SYSTEM

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India is well-positioned to develop a pension system that is inclusive and future-ready with sustained institutional strengthening, according to the Economic Survey 2025-26 (Apr-Mar), which was tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday.

"Continued innovation in service delivery, data integration and consumer guidance will be crucial for the next phase," according to the document. "Global experiences of developed pension systems underscore the value of lifecycle planning tools, personalised dashboards, and automated advisory nudges, all of which can be integrated into India's maturing digital public infrastructure."

More contributory and non-contributory schemes will support the country's pension growth, the survey said. Engagement with state governments, cooperatives, farmer networks, and gig-platform companies can ensure last-mile reach, it said.

"At the contributory end, simplifying enrolment through Aadhaar-based authentication, enabling frictionless micro-contributions via digital payments, and synchronising pension outreach with broader financial inclusion drives can help deepen penetration."

India's pension system has expanded steadily, but overall coverage remains modest relative to the size of the workforce, according to the survey. Persistent awareness gaps, with low-income and rural households maintaining limited exposure to long-term retirement products also prevail.

The Mercer CFA Global Pension Index, which is a global benchmark, consistently ranks India lower in terms of adequacy and system maturity, reflecting relatively low replacement rates and modest pension assets compared to the Organisation for Economic Co-operation and Development countries, the survey said. Pension assets in India make up 15-20% of GDP, significantly less than the 60-100% range seen in more advanced pension markets.

The proportion of the old-age population, above 60 years, to the total population is expected to increase from 10.1% in 2021 to 14.9% in 2036. "At the same time, the proportion of the working-age population (15-59) is projected to increase marginally from 64.2 per cent to 64.9 per cent during the same period," the survey said. 

Reported by J. Navya Sruthi

Edited by Ashish Shirke

EQUALITY OF OPPORTUNITIES KEY TO RURAL DEVELOPMENT

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Inclusive development by ensuring equality of opportunities is central to rural development, the Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament Thursday, said. "... encouraging equality of opportunity is critical for economic efficiency since it maximises the utilisation of individual skills," it said.

Government policies have helped reduce poverty by influencing "income distribution, primarily through subsidies, pensions, direct transfers, and public expenditures on social services, including education and healthcare," it said. The Household Consumption Expenditure Survey 2023-24 reported that the bottom 5-10% of the population in both rural and urban areas saw the largest growth in average monthly per capita expenditure between 2022-23 and 2023-24, the survey said.

"Reviving the rural economy through local opportunities and innovation is essential," it said, adding that it requires safeguarding the environment, preserving culture and tradition, and promoting inclusive growth. Social development requires active community participation and continuous feedback mechanisms, the survey said. 

Reported by Nandini Siha

Edited by Saji George Titus

INDIA'S GDP SEEN GROWING 6.8-7.2% FY27 ON HIGHER DEMAND, INVEST

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The Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday, has projected India's real GDP growth in FY27 at 6.8-7.2%. It also pegged India's medium-term growth potential at around 7%.

This would be lower than the 7.4% growth estimated for FY26 in the government's first advance estimate. Last year, the Economic Survey had pegged GDP growth in FY26 at 6.3-6.8%.

Growth in India is expected to remain resilient next year even as the outlook for the global economy remains dim because of trade conflicts, the survey said. Downside risks to global growth are prominent even as fragile stability holds for now, it added. 

"For India, these global conditions translate into external uncertainties rather than immediate macroeconomic stress," the survey said. "Slower growth in key trading partners, tariff-induced disruptions to trade and volatility in capital flows could intermittently weigh on exports and investor sentiment."

India faces a 50% tariff on exports to the US even as the two countries negotiate a trade deal. Trade negotiations with the US are expected to conclude during the year, the survey said, which could help reduce uncertainty on the external front. "While these risks remain manageable, they reinforce the importance of maintaining adequate buffers and policy credibility."

Growth forecasts were revised downward after the US announced the 50% tariff on India but the economy has expanded at a quicker pace due to a slew of structural reforms and policy measures, the survey said. India's GDP growth rose to a six-quarter high of 8.2% in the September quarter. 

Supported by domestic drivers and demand, the balance of risks around India's growth remains broadly even, the survey said. "The outlook, therefore, is one of steady growth amid global uncertainty, requiring caution, but not pessimism." 

The Survey said that FY27 was expected to be a year of adjustment, with firms and households adapting to goods and services tax rate rationalisation, deregulation, and simplification of compliance requirements across sectors – all steps the government undertook to mitigate the impact of global uncertainity and penal tarifffs which made FY26 an "unusually challenging year for the economy".

The Survey's projection of 6.8-7.2% GDP growth in FY27 is higher than the forecasts by the International Monetary Fund and the World Bank. The IMF earlier this month projected India's GDP growth in FY27 at 6.4%, while the World Bank sees it at 6.5%.

For the December quarter, the Survey sees GDP growth at a resilient 7%, even as it would be lower than the 8% growth in the first half of FY26. GDP growth is seen at 7% in Oct-Dec based on a nowcast model developed by the economic division in the Department of Economic Affairs. Indicators show strengthening economic momentum in recent months of the back of government reforms, the Survey said. 

Consumption demand has been buoyant in FY26, thanks to the positive impact of GST rate rationalisation and softer inflation which improved the real purchasing power of rural non-farm income, the Survey said. GST rate changes are expected to support demand and boost revenues, it said. 

"Currently, the strong consumption growth observed in H1, along with supportive highfrequency indicators during Q3 of FY26, suggests that private consumption is likely to remain resilient throughout the year," the Survey said. In FY27, domestic demand and investment are seen gaining strength, the Survey said. 

While demand remains resilient, private investment intentions are also improving. These conditions provide resilience against external shocks and support the continuation of growth momentum, the Survey said. Agricultural supply prospects are expected to strengthen farm incomes and sustain rural demand, enabling agriculture to provide a steady contribution to overall growth momentum in the second half of FY26. 

Going ahead, the Survey called for "farm-to-fork" policies that streamline the supply chain from producers to consumers—emphasising freshness, local sourcing, and fewer intermediaries, thereby reducing overall cost in the economy. 

Reported by Shubham Rana

Edited by Avishek Dutta

CENTRE'S FISCAL TRAJECTORY STANDS OUT AMID ELEVATED GLOBAL DEBT

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The Centre's fiscal trajectory, combining consolidation with sustained public investment, stands out amidst a backdrop of elevated global debt and strained fiscal space in several countries, the Economic Survey for 2025-26 (Apr-Mar) said Thursday. Fiscal resilience also comes amid elevated expenditure pressures and uncertainty around revenue streams, reflecting "deliberate and sustained policy effort rather than a natural and easy progression", the survey presented in Parliament said. As the central government continues fiscal consolidation over the medium term, the general government debt, including that of the states and the Centre, is expected to remain on a consolidation trajectory, it said.

"It is noteworthy that the government was determined to and succeeded in bringing down the fiscal deficit ratio as promised, despite it not being a legislative target, even while improving the quality of fiscal expenditure with a concurrent emphasis on capital expenditure," the survey, authored by a team led by Chief Economic Adviser V. Anantha Nageswaran, said. "Among other things, the conservative and prudent approach to fiscal management, which enhanced fiscal credibility, led to India's sovereign rating upgrades by several credit rating agencies in FY26," it added. 

The government has projected a fiscal deficit of 4.4% of GDP in FY26, marking the last leg of consolidation under the current fiscal deficit-targeting roadmap before it shifts to a different metric of fiscal discipline. The Centre has announced that from FY27, it will target the debt-to-GDP ratio. "The choice of the debt-to-GDP ratio as the fiscal anchor was consistent with global thinking. It was also considered a more reliable measure of the government's fiscal performance, as it captures the cumulative effect of past and current fiscal decisions," according to the survey.

The FY26 budget document said the government aims to keep its fiscal deficit at a level each year so that central government debt will be on a declining path as a percentage of GDP. Its target for fiscal consolidation is the Centre's debt at 50% of GDP, plus or minus 1%, by FY31. Government debt is projected to reach 56.1% of GDP at the end of FY26.

Many economists flagged that a debt-to-GDP glide path is not adequate to ensure fiscal discipline, and that the Budget must lay down a concrete fiscal deficit path, in line with the Fiscal Responsibility and Budget Management framework. The survey argued that, while "prima facie appropriate", in the highly uncertain global environment, it is important to "retain greater policy freedom" and to commit to targets that the government can deliver on. 

"Since the FRBM Act was first enacted in 2003, the 3% (fiscal deficit) target has been achieved only once. This eroded India's fiscal credibility, and it has taken five years of sustained commitment to fiscal prudence post-COVID to win back the trust of financial markets and credit rating agencies. It is important to retain that trust," the survey said. The new fiscal policy framework meets the requirements. "It is a concrete commitment with a specific date. Yet it affords the government flexibility to fine-tune fiscal policy in response to emerging needs in the intervening period, in a volatile and unpredictable geopolitical and geoeconomic environment," the survey said, defending the framework. 

The survey suggested that once the current target of 50% plus or minus 1% is met and fiscal deficits decline gradually, a new FRBM target may be considered at the end of the 16th Finance Commission period. The 16th Finance Commission's recommendations will be tabled in Parliament on Sunday, along with the Budget for FY27. "A return to a rule-based regime will likely be credible and durable if ushered in after a period of lower global macro uncertainty and after debt and/or deficit ratios come meaningfully closer to 50% or 3% of GDP, respectively," the survey said. 

The commission, which submitted its report to the president on Nov. 17, is tasked with determining the formula for states' share of central taxes and grants-in-aid for five years starting FY27. The recommendations of the 16th Finance Commission will also play a critical role in shaping Centre-state fiscal relations, influencing the quantum and composition of resource transfers, and thereby affecting state-level fiscal outcomes, the survey said. It underlined the importance of states' fiscal prudence, especially from a credit rating perspective, with rating agencies focusing on general government debt rather than central debt. 

"Strong macroeconomic fundamentals have been reinforced by a calibrated fiscal strategy that prioritised capital expenditure while steadily consolidating deficits and debt," the survey said. 

To improve the quality of expenditure, the Centre has shifted its focus to capital expenditure to sustainably boost growth in the post-pandemic era. The Narendra Modi government has increased its capital expenditure allocation to INR 11.21 trillion for FY26, nearly three times what it was six years ago. State governments have also made progress in recent years in scaling up capital expenditure and strengthening their own revenue mobilisation. However, emerging trends in state-level debt and deficits "underscore the need for continued calibration", the survey said. 

Speaking about cash transfers, an exercise that states heavily depend on to revive consumption demand, the Economic Survey said that their rapid scale-up and persistence raise concerns about fiscal sustainability and medium-term growth, particularly when not complemented by investments in employment, skills, and human capital.

Higher allocations to cash transfer schemes also involve clear trade-offs. "Unless deficits widen further, additional spending will crowd out resources for critical social and physical infrastructure. But deficits cannot widen any further without causing further deterioration in the overall financial health of the state," it said. These trade-offs are reinforced by programme design, with many schemes lacking sunset clauses or periodic reviews, increasing rigidity in revenue expenditure. "As a result, capital expenditure, whose growth impact is stronger and more durable, often becomes the casualty when fiscal pressures intensify, with adverse implications for medium-term growth."

While the Centre's incentives have supported higher state capital outlays in recent years, sustaining growth will depend on complementary discipline within revenue expenditure, so that short-term income support does not erode the very investments on which inclusive, medium-term prosperity ultimately rests, the survey said. The government has disbursed loans worth INR 836 billion to states as 50-year, interest-free loans for capital expenditure till Jan. 4. 

On the whole, the Economic Survey noted that fiscal indicators remain on track in FY26, indicating adherence to the budgeted consolidation path.

Reported by Priyasmita Dutta

Edited by Saji George Titus

INDIA'S AI STRENGTH IN APP-LED INNOVATION, USE OF DOMESTIC DATA

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India's position in the artificial intelligence landscape is unique, with application-led innovations and leveraged domestic data as key strengths, according to the Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday. The survey highlights India's late entry into the AI transition is an "underappreciated advantage", allowing the country to learn from early adopters' mistakes and design resource-efficient AI systems.

"India's position as a relatively late mover in the AI transition also confers an underappreciated advantage," Economic Survey said. "Early adopters who scaled AI under conditions of a regulatory vacuum and cheap capital have now locked themselves into circumstances that are very difficult to back away from. This includes a commitment to energyintensive architectures that are detrimental to the environment and mounting financial commitments with unclear revenue pathways. With the sums of money involved, discussions surrounding government backstops have emerged as possible insurance against a fallout, in the advanced economies."

The Economic Survey also highlights the need for the financial system to improve regulations and manage AI risks. Additionaly, the survey said AI-intensive services exports have grown faster than less AI-exposed ones. India's task now is to ensure AI development aligns with its developmental priorities and long-term economic resilience goals. 

Further, the Reserve Bank of India found AI adoption in Indian finance is still nascent, with only about 21% of surveyed banks and financial institutions implementing or developing AI solutions. Larger banks are leading the charge, while smaller urban cooperative banks and NBFCs struggle with resource constraints like poor data infrastructure, limited skilled talent, and tight IT budgets. Even early adopters are using AI for basic tasks like process efficiency, customer interactions, lead generation, and internal decision support, rather than complex autonomous decision-making.

The RBI's FREE-AI framework fosters innovation and robust risk management, treating them as complementary forces. It supports the India AI Mission and aligns with the Digital Personal Data Protection Act. This positions India as an AI governance leader, setting an example for emerging economies to balance innovation with social responsibility. 

Going forward, India's AI strategy needs careful sequencing to avoid premature commitments or over-regulation. The approach should focus on building coordination, developing capacity, enabling institutions and markets to evolve together.

"The first phase should focus on operationalising already announced institutions and aligning incentives to enable experimentation," the Economic Survey said. "Policy should enable bottom-up innovation by expanding the reach of the existing shared infrastructure under the IndiaAI Mission. This includes a government-hosted community-curated code repository and pooled access to public datasets, facilitated by initiatives already underway to enable shared access to computing infrastructure. A clear focus on application- or sectorspecific, small and open-weight models will enable efficient resource utilisation."

Data governance should evolve under the Digital Personal Data Protection Act framework, introducing data categorisation and auditability requirements for large-scale AI training. This should be paired with incentives for domestic value retention, like menu-based contribution pathways. Human capital pipelines, particularly the 'earn-and-learn' pathways and curricular flexibility, should be scaled using existing legislative and budgetary levers.

Going forward, the choices made over the coming few years will determine whether AI deepens existing structural divides or becomes a tool for broad-based productivity and dignified work. India's task is to ensure that AI development remains aligned with its developmental priorities and its long-term ambition to achieve economic resilience, according to the Economic Survey.

Reported by Vaishali Tyagi

Edited by Avishek Dutta

GOVT MUST ENSURE INCENTIVES DON'T FAVOUR ONE CROP OVER OTHERS

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The Economic Survey 2025-26 (Apr-Mar) has urged the government to ensure that farm incentives do not favor one crop over others. It said skewed policy signals are distorting India's evolving farm support system, unintentionally driving farmers toward ethanol-related grains at the expense of pulses and oilseeds.

The survey said unbalanced incentives risk creating "tension between Aatmanirbharta in energy and Aatmanirbharta in food". The survey has called for a holistic policy roadmap that safeguards both energy security and food security.

The survey said administered pricing, procurement, and subsidy frameworks must be "calibrated carefully" to avoid encouraging excessive concentration in a few crops. "Energy security objectives must not compromise food security or nutritional outcomes," it said, stressing that incentives should remain neutral across crops and aligned with agro-climatic suitability and market demand.

Highlighting structural distortions, the survey noted that public procurement of rice and wheat has grown faster than underlying food security requirements. While procurement has played a vital role in stabilising farm incomes and supporting the public distribution system, excess accumulation has led to persistently high buffer stocks and rising carrying costs. "Resources absorbed by storage, handling, and interest costs could be deployed more productively within agriculture itself," it said.

This in the backdrop of India's rising dependence on imports of edible oils and pulses. The reason, as per the survey, is farmers increasingly preferring crops linked to assured offtake and pricing, particularly ethanol-related grains such as maize. The survey observed that ethanol pricing has created strong market signals in favour of maize, contributing to acreage and production gains, while pulses and oilseeds have seen relatively weaker growth. "Farmers are responding rationally to incentives," it said.

This has resulted in an emerging policy dilemma. "There is a visible tension between energy security goals and food security priorities," it said, noting that without periodic recalibration, incentives could entrench import dependence on pulses and edible oils and expose domestic food prices to greater volatility.

To address this, the survey has called for a comprehensive and holistic roadmap that balances energy security, food security, and farm incomes. It suggested this be achieved by accelerating productivity gains in pulses and oilseeds, avoiding price or procurement distortions that favour specific feedstocks, and planning ethanol feedstock expansion in line with regional resource endowments.

On crop diversification, the Economic Survey said wheat and rice farmers should be offered financially viable alternatives, particularly in regions with high procurement but modest farm profitability. Eastern and central India were identified as priority regions for the initial phase, given their agro-climatic suitability for pulses, oilseeds, and maize. Regions critical for national food security could be included later, once the approach is tested, it said.

Such diversification efforts, it said, would require strong Centre–state partnerships. The Centre could fund its share through savings in procurement, storage and interest costs, while states could contribute through reduced input subsidies and existing sustainable agriculture incentives. Transitional financing, where required, should be linked to verified acreage shifts and subsidy savings.

Beyond crop patterns, the survey flagged use of fertilisers as a growing concern. It said fertiliser decisions must be "anchored in soil health and crop-specific requirements", warning that excessive use of nitrogen has distorted nutrient balance, degraded soil quality and weakened yield response. The survey made a case for separating farmer income support from fertiliser purchase, so that price distortions do not drive overuse of specific nutrients.

"Income support should protect farmers, not incentivise inefficient input use," it said, adding that continued misallocation of nutrients raises costs without commensurate productivity gains and undermines long-term sustainability.

Despite these challenges, the Economic Survey said improving farm supply prospects -- supported by favourable monsoons, diversification towards high-value crops, and better market alignment -- can strengthen farm incomes and rural demand. Horticulture, in particular, has emerged as a major growth driver, reflecting a gradual shift in India's agricultural output mix.

Reported by Pallavi Singhal

Edited by Ashish Shirke

NEXT PHASE OF GST REFORMS CAN FOCUS ON E-WAY BILL SYSTEM

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The next wave of the Goods and Services Tax reforms can focus on reimagining the e-way bill system as a facilitator of smooth logistics rather than only a tool for enforcement and control, in line with the changing needs of businesses and supply chains, according to the Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday.

The survey said policy design could increasingly rely on trust-based and technology-driven compliance models, such as a "trusted dealer" framework, under which taxpayers with a strong compliance record face minimal physical checks and enjoy greater certainty in the movement of goods. In addition, wider use of e-seals and electronic locking systems, integrated with e-way bills and vehicle-tracking technologies could ensure secure, end-to-end tracking of consignents without routine stoppages on the road, it added.

State governments would be central to this transition by moving towards risk-based, system-generated alerts and limiting discretionary checks. "Together, these reforms would amount to a significant deregulation of the logistics ecosystem, reducing costs and delays for trade while maintaining effective, non-intrusive oversight for tax administration," according to the survey.

The recent GST rate cut is expected to stimulate higher consumption volumes and strengthen compliance, which could offset the impact of rate reductions on revenues.

Reported by Ashutosh Pati

Edited by Avishek Dutta

SERVICES EXPORTS CRITICAL BUFFER AMID GLOBAL UNCERTAINTY

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Amid subdued global goods trade owing to geopolitical disruptions and tariffs, services exports have provided India with a critical buffer, the Economic Survey for the financial year 2025-26 (Apr-Mar) has observed. The Survey stressed that the momentum should be sustained through continued diversification within services and further movement up the value chain in keeping with evolving global demand.

In the first six months of FY26, the share of services exports in GDP rose to 10% from 9.7% in the corresponding period of FY25. "Services exports have become a central pillar of India's external sector and a key driver of growth. Their share in GDP averaged 9.7 per cent between FY23 and FY25, up from 7.4 per cent in the pre-pandemic period," the Economic Survey, tabled in the Lok Sabha by Finance Minister Nirmala Sitharaman Thursday, noted.

The near doubling of India's services exports to 14% between FY23 and FY25, compared with 7.6% in the period from FY16 to FY20, indicate "strong and broad-based" global demand for Indian services, it said.

Amid increasingly competitive conditions in the global services markets and heightened policy uncertainty, services export growth moderated to 8% in the eight months ending November. Software services, accounting for over 40% of total services exports, remain the primary driver of growth, expanding at an average rate of 13.5% during FY23-FY25 compared with 4.7% during FY16-FY20, supported by strong global demand for digital services, the Survey said.

Professional and management consulting services have emerged as the second-largest contributor with a rate of growth of 25.9%, taking their share to 18.3% in FY23-FY25 from 10.5% during FY16-FY20. "Together, these segments account for over 65 per cent of services exports, highlighting India's growing specialisation in cross-border, knowledge-intensive activities," the Survey said.

Reported by Asim Khan

Edited by Rajeev Pai

End

US$1 = INR 91.96

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Filed by Ashish Shirke

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