New Delhi: The Economic Survey 2025–26 positions itself as a document of strategic sobriety. It urges India to internalise global disorder, practise delayed gratification, and privilege resilience over speed. While its diagnosis of global fragmentation is broadly accurate, its policy conclusions are disproportionately conservative. When tested against international evidence and India’s own structural imperatives, the Survey’s strategy risks institutionalising caution at the very moment acceleration is required.
Resilience, as the data show, is a necessary condition for growth—but it has never been a sufficient one.
The Survey assumes a structurally hostile global environment in which macroeconomic virtue no longer attracts capital or trade opportunity. Yet comparative data suggest a more differentiated reality.
Between 2021 and 2024, global FDI flows fell by roughly 12 per cent (UNCTAD), but inflows to select middle-income economies rose sharply. Vietnam attracted FDI equivalent to 6.3 per cent of GDP, Mexico 4.1 per cent, and Poland over 3.5 per cent—each benefiting from supply-chain reconfiguration rather than retreat. India, by contrast, averaged FDI inflows of around 1.5 per cent of GDP during the same period.
The implication is not that the world is benign, but that capital remains mobile towards jurisdictions offering demand depth, policy clarity and execution speed. Framing globalisation as uniformly coercive risks underplaying India’s ability to shape outcomes rather than merely absorb shocks.
India’s revised potential growth estimate of 7 per cent is modest by comparative standards. South Korea, Taiwan and China sustained growth rates of 8–10 per cent during their manufacturing transition phases—at much lower per capita incomes.
More telling is investment intensity. India’s gross fixed capital formation at ~32 per cent of GDP remains below China’s 40+ per cent during its take-off years and Vietnam’s current ~34–35 per cent. Indonesia, with similar demographics, has raised investment through aggressive industrial clustering and domestic demand expansion, pushing private capex growth above 8 per cent annually since 2022.
India’s reliance on public capex—now accounting for over one-third of total investment growth—is an achievement, but also a warning. No large economy has industrialised on public investment alone. The Survey’s scepticism towards consumption support contrasts sharply with international experience. Countries that successfully scaled manufacturing did so alongside rising household demand.
China’s private consumption share rose from 36 per cent of GDP in 2008 to over 39 per cent by 2019—small by global standards, but decisive in sustaining capacity utilisation. Vietnam’s consumption growth averaged 7.4 per cent annually between 2015 and 2023, anchoring private investment despite export volatility.
India’s private consumption growth, by contrast, has averaged closer to 5.5 per cent post-pandemic, with rural real wages barely exceeding inflation. Capacity utilisation below 76 per cent reinforces private investment hesitation.
International evidence is unambiguous: investment follows demand credibility, not restraint signalling.
The Survey treats India’s current account constraint as quasi-permanent. Comparative data challenge this fatalism. China reduced its current account deficit within a decade of industrial take-off by aggressively scaling manufacturing exports. South Korea transitioned to surplus within seven years of its heavy-industry push. Vietnam moved from persistent deficit to surplus within a decade through electronics-led exports.
India’s merchandise exports remain stuck at ~1.8 per cent of global exports, compared to Vietnam’s 1.4 per cent despite India’s economy being eight times larger. This is not an inevitability—it is a policy outcome. Export scale is not delayed gratification; it is delayed execution.
Manufacturing accounts for 16–17 per cent of India’s GDP. Comparable economies crossed 20 per cent before sustained income convergence began. Thailand peaked at 30 per cent, Malaysia at 24 per cent, China above 28 per cent.
The Survey acknowledges this stagnation but attributes it largely to global conditions and cost structures. International comparison suggests domestic constraints are decisive: land acquisition delays, fragmented labour markets, power costs 20–30 per cent higher than Vietnam, and logistics costs at ~13–14 per cent of GDP versus 8–9 per cent in OECD Asia.
Resilience does not lower costs; reform does.
India’s real interest rates remain among the highest in emerging Asia. Indonesia’s 10-year bond yield averages ~6.2 per cent with inflation-adjusted rates lower than India’s despite similar debt ratios. Vietnam borrows cheaper despite lower reserves.
Domestic factors—bank risk aversion, shallow bond markets, and regulatory fragmentation—explain much of this premium. Excessive emphasis on external discipline risks ignoring solvable internal distortions.
High capital costs are a growth tax, not a moral outcome.
The Survey’s fiscal philosophy implicitly favours consolidation over expansion. Yet IMF data show that economies which sustained counter-cyclical fiscal policy post-pandemic—such as the US, South Korea and Germany—recovered investment faster without destabilising debt dynamics.
India’s general government debt at ~82 per cent of GDP is comparable to the US (97 per cent) and France (112 per cent). What differs is growth ambition. Debt sustainability is a function of growth differentials, not austerity optics.
India’s states and cities are asked to practise discipline without fiscal power. Municipal revenues at under 1 per cent of GDP contrast with 7–8 per cent in OECD economies and over 3 per cent in China. Urban productivity gains elsewhere were driven by empowered city governments. India’s urban bottleneck is not resilience—it is institutional paralysis.
Policy rebuttal: what the Survey underestimates -Demand credibility is a growth lever, not a luxury; Manufacturing scale requires speed, subsidies and tolerance for failure; Fiscal space should be used counter-cyclically, not conserved symbolically; Decentralisation is economic reform, not administrative generosity; and Resilience without ambition leads to prudent stagnation
The Economic Survey is right to warn that the global terrain has changed. But history shows that periods of disorder reward countries that act decisively, not defensively.
Resilience is the floor of strategy—not its ceiling.
India’s risk is not overheating or excess. It is underusing a narrow demographic and geopolitical window while convincing itself that caution is wisdom.
The data do not support restraint as a development strategy. They support acceleration—messy, uneven, politically difficult, but transformative. That is the debate the Survey avoids.