By Professor Satya Narayan Misra in Bhubaneswar, February 1, 2026: The Economic Survey is a unique document coming out of the staid corridors of the government, and carry a lot of heft, credibility and interest. As it is prepared by a clutch of economists helmed by reputed economists like I G Patel, Bimal Jalan, Kaushik Basu, Rajan and Arvind Subramaniam in the past till K Subramaniam, a light weight professor in finance from ISB took over in 2018.

From a fairly independent perspective on the outlook of the economy, the document now does a bit of cheerleading for the Modi government. The Economic Survey just released carries that adulatory tone, while projecting a vibrant picture of Indian economy clocking 7.4% while it believes that the rest of the world would be blighted by economic uncertainty and trade distortion. This is contrary to the projection of World Economic Outlook released by IMF which foresees a recovery by major economies like USA and China in 2026-27. Be that as it may, the survey clearly highlights how on the supply side the key contributor will be the Services sector, with 7.2% growth, while on the demand side, it will be private final consumption expenditure which constitutes 61.4% of the GDP and shows a growth of 7. 2%.

Selected Macro Economic Trends

Parameter                2024-25     2025-26          2026-27
Real GDP                   9.4               7.4                    6.8-7.2%
CPI                              4.1               2.1                          4
Investment                30 %            29%                     30%
Manufacturing          12.3%            2.7%                   -.7%
Services                        9%                7.2%                     9.1%

Quite clearly while the real GDP is going to increase at a fast clip and inflation is expected to be benign, investment has struck a plateau, with private sector investment not picking up. Also manufacturing and its cost remains an area of serious concern, which in turn has huge implication on our export competitiveness and employment generation. The falling rupee completes the triad of this concern which has been captured rather well in the Economic Survey.

Manufacturing

Manufacturing has been the major source of strength for several economies like China, South Korea , Japan & Germany, post WWII . With manufacturing constituting around 30-35% of their GDP , they have always had Current Account Surplus and a network of Global Value Chains. The National Manufacturing Zone Policy (2011) , helmed by Mr Krishnamurti had set a target to increase the share of manufacturing from 16% to 25% in a decade’s time. Concomitantly, the expectation was to generate 10 million jobs every year. But for a few states like Maharashtra, Gujurat, Tamil Nadu, Karnataka &AP, manufacturing zones have eluded most states. The new National Manufacturing Mission (NMM: 2025) has now set the target to increase the share of manufacturing from 13% to 25%, and generate 143 M jobs by 2035.The following table will show the changing trajectory of country share of world manufacturing.

Country Share of World Manufacturing

Country           1997                  2022
China                7.5%                  30%
USA                22.5%                  15%
Japan             17.5%                    6%
Germany        7.5%                     5 %
India               2%                        2.5%

In case of India the PLI scheme introduced in 2020 shows that average annual growth of 10.6% (2021-2025) in exports and 12.6% in imports. Besides, while sectors like electronics have clearly benefited, textiles and automobiles have not shown similar growth. The Economic Survey brings out how textiles which provides 45 million direct jobs accounts for only 4% of global exports. The challenges that confront it are its scale; heavy reliance on cotton as compared to Man made Fibres globally and limited FDI & technology adaption. The Survey also brings out how micro enterprises which account for 85% of 7.4 Cr MSMEs which contribute 31% of GDP are hugely handicapped due to limited access to formal credit due to limited collateral, technology and quality manpower.

Export Competitiveness & Weak Rupee

The Survey notes with concern how rupee has been depreciating fast and observes that a stable and robust currency can only be achieved through export competitiveness and reduction in manufacturing cost. In the long run, success will depend on India’s ability to integrate in Global Value Chains as a high tech, high production manufacturing hub supported by stable and innovation friendly policies. The reasons for falling rupee are persistent demand imbalance, tepid net inflow of FDI and negative outflow of FPI. While merchandise exports per month is $37B, the import amount to $62 B. The net inflow of FDI is only $36 B, which is low for a $4 trillion economy. FDI inflow is only 1.7% of GDP now as compared to 3% in 2000s. . The year also witnessed a negative outflow of FPI to the tune of $3.9B. Quite clearly India is not the preferred place for long term investment. India can take lessons from countries like Vietnam, Indonesia and Taiwan who have become platform base for Multi National Enterprises (MNEs) and integrated nicely with Global Vale Chains (GVCs)

The Way Forward

It was Aaron Levenstein who famously observed: ‘Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital.’ In the context of India, the hype around high growth clearly masks our dismal record in supporting the micro enterprises, lopsided priority to big manufacturers & preferred sectors at the expense of vulnerable MSMEs, and the need to make our exports competitive to harness the benefit that will flow out of FTAs. In the World Logistics Performance Index, India stands at 38, which shows we are far from achieving world’s best in terms of logistics.

The Survey, unlike the previous year’s does not bring out measures that the government needs to take to generate 14 million jobs, encourage private sector investment and most importantly how to resuscitate the 90% workers who straddle the informal economy with monthly income as low as Rs 5000/ for casuals and Rs 7000 for self-employed as brought out by the India Employment Report (2024). The need for much higher allocation for quality education in public schools, skilling and health care has also been skirted by the Survey. It also does not touch upon action needed to improve India’s low Tax/GDP which is stagnant around 12%. The concern for distributive justice and means to achieve shared prosperity eludes neoclassical thinking of India’s economic mandarins.