Economic Survey of India 2025–26: Looking Beyond Headline Numbers

A data-driven breakdown of the Economic Survey of India 2025–26 – covering GDP outlook, labor reforms, PLI performance, exports, infrastructure, and what shifting productivity dynamics mean for foreign investors.

Economic Survey of India 2025–26: Key numbers at a glance 

India’s Economic Survey 2025–26 outlines steady macroeconomic expansion alongside rising structural imperatives. The medium-term outlook remains strong, with potential GDP growth pegged near 7 percent, supported by higher capital formation, improving productivity, and stable labor inputs.

Altogether, these indicators reinforce India’s position as a high-growth operating base, while underlining that productivity gains, workforce skilling, and infrastructure execution will increasingly determine investor returns.

ALSO READ: Economic Survey of India 2025 – Macro View and Sector Insights

Growth is holding – but the model is shifting

Find Business Support

Get Expert Assistance for Your Site Selection & Location Strategy (Infrastructure + State-Level Execution)

The Survey pegs India’s medium-term expansion at close to 7 percent, even as advanced economies slow and geopolitical fragmentation reshapes trade. This resilience is anchored in:

• Strong domestic demand
• Services-led exports
• Public capex crowding in private investment

However, the Survey explicitly warns that headline growth is no longer sufficient. Future competitiveness will depend on translating macro stability into firm-level productivity gains, especially across manufacturing, logistics, and human capital. While India’s growth outlook remains near ~7 percent, the Survey stresses the need to improve productivity, logistics efficiency, and workforce quality to sustain competitiveness – moving beyond headline GDP numbers toward structural performance.

Labor, skills, and the productivity constraint

One of the Survey’s sharpest signals concerns labor quality.

While formalization has improved, nearly 40 percent of gig workers earn under INR 15,000 per month, indicating the limits of platform-driven employment without structured skilling pathways. The Survey estimates that comprehensive labor reforms could lift GDP by 1.25 percent by FY30, provided they are paired with vocational training and workforce mobility.

This matters directly for foreign manufacturers and services firms: India’s cost advantage increasingly depends on skills density, not just wage arbitrage.

Infrastructure and digital capacity become strategic differentiators

The Survey highlights major pressure points:

• Data center capacity expected to reach ~8 GW by 2030, reflecting explosive AI, cloud, and fintech demand
• Persistent logistics inefficiencies despite highway expansion
• Port connectivity and multimodal integration remain uneven across states

For investors in technology, electronics, logistics, and advanced manufacturing, site selection is becoming more granular – driven by power availability, data infrastructure, and freight economics, not just incentives.

Capital markets and state reform enter the spotlight

On the fiscal side, the government plans to reduce its stake in CPSEs to 26 percent, reinforcing a longer-term shift toward asset monetization and private participation.

At the same time, the Survey calls on states to strengthen fiscal discipline and human capital investment, warning that growth will increasingly diverge between reform-oriented and lagging regions.

This elevates state-level policy alignment as a core variable in investment outcomes.

Manufacturing and exports: Momentum, with uneven performance

Find Business Support

Get Help Choosing the Right Market Entry & Operating Model (Entity Setup + Compliance)

The Economic Survey 2025–26 credits India’s PLI scheme with delivering “remarkable trade performance” since its launch in April 2020, but cautions that outcomes remain highly uneven across participating sectors.

• Exports from PLI-covered sectors recorded an average annual growth rate (AAGR) of 10.6 percent during FY21–FY25
• Export expansion has been driven primarily by a small group of high-performing sectors, while several others show only moderate momentum
• Imports also rose, at an AAGR of 12.6 percent, indicating that export growth has been accompanied by continued reliance on intermediate inputs

For electronics, batteries, solar PV, and other PLI-backed sectors, early alignment with scheme conditions can materially improve project economics. Our advisors support PLI feasibility studies, application support, and supply-chain localization planning. Speak with our specialists: india@dezshira.com 

High-performing export sectors (FY21–FY25)

Sectors posting high export growth (AAGR above 20 percent) include:

• IT hardware – 77.2 percent
• ACC batteries – 45.0 percent
• Electronics – 38.0 percent
• Solar PV – 23.9 percent
• Specialty steel – 22.5 percent

These results reflect capacity scaling and deeper integration into global value chains, with domestic manufacturing increasingly leveraging imported intermediates to support higher-value exports.

Moderate or lagging sectors

In contrast, several PLI segments recorded export growth below 20 percent, including:

• Automobiles – 14.1 percent
• Textiles – 7.8 percent
• Food products – 6.7 percent
• Pharmaceuticals – 6.0 percent
• Medical devices – 6.5 percent
• White goods – 4.8 percent
• Bulk drugs/APIs – 3.5 percent
• Drones – 3.9 percent

This divergence shows structural differences in supply-chain maturity, localization depth, and capital intensity across sectors.

Electronics emerges as flagship success

The electronics segment is highlighted as the standout PLI success story:

• Major smartphone manufacturers have relocated production to India
• India has now emerged as a global mobile phone manufacturing hub

Meanwhile, pharma has also performed strongly, with pharmaceutical sales under PLI exceeding INR 2.63 trillion, including exports of INR 1.69 trillion, and domestic value addition reaching 83.74 percent as of March 2025. Additionally, the automobile industry witnessed a surge in export growth, with over 5.3 million vehicles shipped in FY 2024-25 and posting double digit growth in the first half (H1) 2025-26.

Export diversification cushions US tariff shock

The Economic Survey 2025–26 highlights how India’s strategic export diversification helped labor-intensive sectors absorb the impact of US tariffs imposed in August 2025, with shipments rapidly redirected toward alternative global markets.

US share shrinks, new markets step in

• Several labor-intensive sectors offset the impact of 50 percent US tariffs by pivoting exports to:
  • West Asia (led by the UAE)
  • European Union (notably Spain, Italy, Belgium, Germany, and the Netherlands)
  • East Asia/Southeast Asia (China and Vietnam)
  • South America (Brazil, Argentina, Chile)
  • Russia and parts of Africa

While the US tariffs delivered an initial sector-specific shock, industries including gems & jewelry, textiles, marine products, automobiles, pharmaceuticals, paper, and leather showed a rapid rebound driven by market reorientation.

Alternative destinations for India’s exports (April–November FY26 vs FY25)

Note: (Figures in parentheses indicate YoY export growth rates, unless stated otherwise).
Source: Economic Survey 2025-26, Chapter 4

Services continue to outperform goods

Despite tariff headwinds:

• Merchandise exports declined 2.4 percent (April–Dec 2025)
• Services exports grew 6.5 percent over the same period
• Merchandise imports rose 5.9 percent

This reinforces the stabilizing role of services in India’s external sector.

Quality control orders (QCOs) in India: Toward a more industry-aligned regulatory framework

The Economic Survey 2025–26 notes that QCOs are a critical instrument for mitigating reputational risk stemming from inconsistent product quality – while simultaneously cautioning against regulatory overreach that could unintentionally burden MSMEs.

To address this balance, the Survey proposes a forward-looking QCO framework anchored in:

• Rigorous pre-notification assessments
• Calibrated transition timelines
• Adequate national testing capacity
• Stronger alignment with industry readiness

The objective is to ensure quality regulation enhances competitiveness without disrupting supply chains or imposing disproportionate compliance costs on smaller manufacturers.

As of December 31, 2025, more than 700 products are covered under QCOs, reflecting a sharp expansion over the past decade. The Department for Promotion of Industry and Internal Trade (DPIIT) accounts for the largest share, with 362 products, followed by the Ministry of Steel (151), Textiles (75), Electronics & IT (65), Chemicals & Petrochemicals (38), and Heavy Industries (14), indicating the widening regulatory footprint across core industrial inputs.

Importantly, the Survey warns that overly narrow transition periods can trigger production delays, supply disruptions, and rising inventory costs, particularly for MSMEs that often lack in-house testing infrastructure or the capacity to rapidly adapt to certification requirements.

Where sufficient domestic production capability does not yet exist, the Survey recommends targeted exemptions or alternative compliance pathways – especially for raw materials, intermediates, spare parts, and R&D inputs. It also highlights recent government actions to revoke or suspend QCOs across sectors such as chemicals, plastics, textiles, and metals, reflecting recognition of the need for a more adaptive regulatory approach.

The toys sector is cited as a QCO success story, where the introduction of standards has improved compliance and reduced substandard products, reinforcing the role of QCOs in strengthening market confidence and consumer safety.

Taken together, the Survey signals a strategic shift: quality regulation must evolve from a compliance checklist into an industry-enabling framework, supporting manufacturing resilience while preserving India’s export credibility.

Conclusion

The Economic Survey 2025–26 confirms India’s macro strength – but also marks a transition point.

The next phase of growth will be determined less by aggregate demand and more by:

• Workforce quality
• Infrastructure readiness
• State-level execution
• Digital capacity
• Integration into global production networks

For foreign companies, India in 2026 is not simply a large market – it is a complex operating environment where returns increasingly hinge on location strategy, compliance readiness, and sector-specific execution.

Firms that align early with India’s evolving productivity agenda stand to capture durable advantage; those relying on legacy cost narratives risk underperformance.

India is no longer just a growth market—it is a complex operating environment. Firms that align early with location strategy, incentive frameworks, and compliance planning gain durable advantage. Speak with the experts at Dezan Shira & Associates to translate India’s policy landscape into a practical expansion roadmap. Please feel free to email us at: india@dezshira.com 

• Previous Article Warum deutsche CEOs auf Indien setzen: Die Chancen eines Freihandelsabkommens zwischen Indien und der EU
• Next Article Conclusione del FTA India-UE: ‘La madre di tutti gli accordi’ pronta a rimodellare il commercio globale