By Manoj Chugh, Senior Business and Technology Leader and Advisor
The Economic Survey 2025–26 feels less like a standard macro review and more like a strategic playbook for a geopolitics-driven world, where trade, tech, and capital flows demand more than stability alone. Against a post–Operation Sindoor security backdrop, it positions the Union Budget as a tool for economic mobilization, urging India to evolve from resilience to indispensability by building capabilities, not just cutting costs.
India’s growth remains strong—driven by investments, a solid financial sector, ample reserves, and low current account stress—with FY27 GDP projected at 6.8–7.2%, emphasizing manufacturing for the next export surge. Yet, it candidly flags external vulnerabilities: goods trade deficits and global capital reliance steering currency pressures.
Enter “Swadeshi” as pragmatic insurance, not ideology, but a sequenced indigenisation strategy targeting critical gaps, feasible capabilities, and smart substitution. The survey rejects undisciplined protectionism, insisting success lies in export prowess and value chain integration, not just import curbs.
As a “Middle Power” with size, buffers, and appeal, India still faces a “power gap” where resources are not yet fully leveraged into global sway. The real call? Forge a shock-proof, export-led economy so indispensable that the world buys Indian instinctively, embedding us as a stabilizing force.
2025: India’s best macro run in decades yet the rupee didn’t cooperate
The Survey notes that 2025 ended very differently from how it began. India delivered sustained post-Covid growth momentum through the year with strong output, improving quarterly performance, contained inflation, healthy banks, supportive rainfall prospects and robust financial flows to the commercial sector.
On the policy front, it highlights a clear shift towards dynamism:
Aggressive rate cuts and easier liquidity
Relaxation of macroprudential measures introduced in 2023
Significant household tax breaks in FY26 budget
Fiscal consolidation delivered better-than-target deficit: 4.8% of GDP vs 4.9% budgeted, with 4.4% target for FY26
In an important credibility milestone, India reportedly received credit rating upgrades from three agencies in 2025, including a major upgrade by S&P from BBB- to BBB, described as the first by a major agency in nearly two decades.
Yet, the paradox, despite “stellar” fundamentals, the rupee underperformed. The survey argues that macro performance no longer guarantees currency stability because capital flows are increasingly shaped by geopolitical uncertainty, trade disruptions and risk aversion. India’s trade deficit in goods continues to create dependence on foreign capital. And when flows weaken, rupee stability becomes vulnerable.
Tariffs shock: When geopolitics override economics
A central global risk described is the escalation of US tariffs. The Survey flags a surprise move in 2025: after reciprocal tariffs were announced, an additional penal tariff was later imposed on most Indian merchandise exports to the US, shocking markets that expected India to be an early winner in the new tariff regime. Growth forecasts were cut, but India’s growth still accelerated, supported by reforms.
Strategic power gap: India’s challenge is not only economic
A striking inclusion is the Survey’s reference to the Lowy Institute’s Power Gap Index, stating India operates below its full strategic potential, with a power gap score of -4.0, the lowest in Asia excluding Russia and North Korea. It frames India’s growth mission as uniquely difficult: lifting 145 crore people within a democratic system, without any real global template to copy.
Three global scenarios for 2026: A world of “managed disorder”
The Survey positions 2026 as a year where uncertainty becomes structural, not cyclical. Trade policy, it says, is now driven more by security and politics than efficiency or multilateralism. It outlines three scenarios:
1. “Business as in 2025” but increasingly fragile (probability 40–45%): A volatile but manageable world, integrated, yet distrustful, with episodic shocks requiring active government interventions.
2. Disorderly multipolar breakdown becomes a core risk (probability 40–45%): Rivalry intensifies, sanctions expand, supply chains fragment under political pressure, and cross-border stress transmits with weaker buffers.
3. Systemic shock cascade (probability 10–20%): A worst-case combination where financial stress, geopolitics and technology shocks amplify each other, potentially worse than 2008 in macroeconomic consequences. The Survey flags risks from leveraged AI infrastructure investments (data centre spending shifted off-balance-sheet via SPVs), warning about cascading spillovers if the bubble deflates.
Across scenarios, the common India risk is capital-flow disruption leading to rupee pressure. India has buffers including large market, strategic autonomy, reserves, less-financialised growth model but not insulation.
What the survey argues India must do now
The Survey’s policy conclusion is blunt. India must “run a marathon and sprint at the same time.” It calls for:
*Supply stability and resource buffers
*Redundancy in critical systems
*Diversified trade routes and payment systems
*Treating credibility, predictability and administrative discipline as strategic assets
Key structural argument: cost of capital is macro, not just monetary
The survey advances an important thesis. India’s high cost of capital is structural because persistent current account deficits force reliance on foreign savings, requiring a risk premium. The durable solution is not just liquidity management but transforming into a surplus-generating economy.
Manufacturing is positioned as strategic, not optional
A recurring theme is that services exports have stabilised India but cannot substitute for goods exports when it comes to currency strength and external stability. The survey notes that:
Since 2020, CAGR of total exports was 9.4%
Merchandise export CAGR was 6.4%
Services did much of the heavy lifting, but manufacturing ecosystems remain essential for long-run resilience
The survey also warns against a flawed industrial strategy. Over-protecting upstream sectors (steel/aluminium/textiles fibre) raises costs for downstream exporters, effectively taxing export competitiveness. Instead, it argues, upstream sectors should be supported through cheaper capital rather than tariff shelter.
A reconfigured Survey: 17 chapters, sharper priorities
This edition has been expanded and reorganised by relevance to national priorities. It includes thematic essays on:
India’s AI ecosystem and roadmap
Quality of life and governance in cities
Strategic resilience and indispensability and role of State capacity and private sector
Bottom line
Economic Survey 2025-26 paints India as a high-performing macro outlier in a deteriorating global order. The opportunity is real as growth near or above 7% appears achievable. But the Survey stresses that geopolitics will punish complacency. The next phase of India’s rise must be built on disciplined fiscal consolidation, deeper competitiveness in manufacturing exports, lower structural cost of capital, and a major upgrade in state capacity and execution.
In short, India is doing well, but the world is no longer a fair umpire and resilience has become a growth strategy.
Key messaging for the Technology / IT sector
The Economic Survey 2025-26 carries a clear subtext for India’s technology sector.
The next decade will be defined less by cheap globalisation and more by strategic competition, where digital capability, AI infrastructure, cyber resilience and trusted supply chains become instruments of national power and not just business growth.
1. AI is treated as a strategic growth engine and a strategic risk
The survey positions AI not as a niche technology story, but as the centerpiece of the next productivity cycle.
Core message for the sector:
AI will redefine competitiveness across industries and India must not be a passive adopter
India’s AI ambition must be tied to domestic capability building including compute, models, data, talent and platforms
The AI race will be decided by infrastructure and execution capacity as much as by innovation
At the same time, the survey warns about the financial and systemic risks from the global AI investment cycle:
Heavy leveraged spending in AI infrastructure (notably data centres) is increasingly routed through SPVs and off-balance-sheet structures
A potential “AI investment bubble” could create stress spillovers comparable to past systemic shocks, if demand and monetisation do not materialise fast enough
Implication for IT firms: Clients may accelerate AI adoption, but CIO budgets could also become more volatile in a downturn triggered by AI capex unwinding.
2. Global tech markets will be shaped by geopolitics, not economics
The Survey is explicit that trade policy is now politics-first. This directly impacts Technology/IT through cross-border data governance; digital trade norms; export controls / sanctions regimes; technology stack “trusted partner” requirements; supply chain nationalism (chips, hardware, telecom, cloud)
It describes the world moving from integration to “managed disorder”, where shocks become structural.
What this means for Indian IT:
Service export growth remains strong, but access will increasingly depend on compliance, trust, and geopolitically aligned value chains
Regulatory risk becomes a business risk (US/EU digital rules; AI governance; privacy)
3. Resilience becomes a first-order requirement for digital infrastructure
A strong theme in the Survey is “redundancy and buffers”, previously a defence/energy doctrine, now an economic imperative.
For Technology/IT, the implied priorities are:
Cyber resilience and operational continuity (BCP, redundancy)
Stronger governance over critical digital infrastructure
Secure supply chains (IT hardware + telecom equipment + cloud dependencies)
Ability to withstand cross-border disruptions to payment systems, routing and digital services
Sector messaging: Resilience is not overhead anymore, it is competitiveness.
4. Services exports have been India’s stabiliser and IT remains central
The Survey recognises that while merchandise exports lag, services exports have been the major strength supporting the external sector. The growth rate as mentioned in the overview section implicitly credits services (including IT/ITeS) for sustaining export performance.
What the survey is signalling: IT exports remain India’s most reliable external-sector shock absorber, but the economy still needs stronger goods exports for currency stability.
5. Data centres (DC) & digital infra will lead to macroeconomic infrastructure
The Survey’s caution on AI capex and data centre financing is an important policy signal.
It effectively categorises data centres and compute infrastructure as:
A new class of strategic infrastructure
A new class of financial risk exposure (leverage, SPVs, long-gestation capex)
Implication for hyperscalers / DC players / telecom firms:
Expect sharper policy and regulatory attention to DC financing, energy sourcing, grid integration and resilience norms.
6. India’s competitiveness is now tied to state capacity (including digital governance)
A high-level institutional point in the Survey is that India’s growth path demands stronger governance capacity because external shocks will keep coming.
For Tech/IT this translates to:
Scaling digital public infrastructure (DPI) with higher reliability
Predictable policy environment (data governance, cybersecurity, AI guardrails)
Public procurement and standards to drive domestic capability
The Survey’s argument is that credibility and predictability are strategic assets in a fragmented global order.
7. Policy emphasis: Lower cost of capital matters for tech scale-up
The Survey highlights that India’s cost of capital is structurally high because the economy is reliant on foreign savings (current account dynamics).
Message for tech ecosystem / startups:
Lower cost of capital leads to faster tech scaling, especially compute-heavy AI businesses
India’s ability to fund AI-scale capex domestically becomes a strategic differentiator
8. In a nutshell: The “India Tech” story is shifting from labour arbitrage to strategic capability
The survey’s implied direction for the sector is clear:
Move from IT as cost-efficiency outsourcing to IT as capability partner
Deepen high-value work: AI engineering, cloud transformation, security, product-led offerings
Strengthen trust: compliance, sovereignty readiness, cybersecurity maturity
Key messaging for the trade sector
The survey’s trade messaging is essentially pinned down to India must export more, but in a world where trade is weaponised. That means the old playbook of cheap production and market access won’t be enough. India needs a smarter export strategy built on competitiveness, diversified markets, stable logistics, and policy discipline.
Most importantly, the survey says trade deficits create financial fragility; so, goods exports are not just about jobs but they are about currency stability and economic sovereignty.
1. The era of predictable global trade is over
The survey’s single biggest trade takeaway is almost philosophical. Trade policy has stopped being ‘economic policy’. It is now national security policy. That has huge implications: tariffs can rise overnight, market access can get politicised, “rules-based” trade can be bent or bypassed, supply chains can be broken by one decision in one capital city. The Survey frames 2026 as a world of “managed disorder”, where shocks are no longer surprises but are the new normal.
2. The US tariff episode is a loud warning bell
The survey spends meaningful attention on the US tariff developments, and the message is blunt: India assumed it would be an early beneficiary in the new tariff order. But penal tariffs were imposed on Indian exports, and markets were caught off guard.
What this tells exporters:
You can do everything right domestically
Still face trade punishment externally
Because the external world is not purely rational anymore
It is a reminder that export success now requires:
Commercial competitiveness and
Diplomatic/strategic insulation
3. The trade balance is not a statistic as it shapes rupee stability
The survey makes an important point in plain terms. When India runs a merchandise trade deficit, it must attract foreign capital to bridge the gap. If the world turns uncertain and capital slows down, the rupee comes under pressure. So, trade becomes a macro vulnerability where trade deficit leads to dependence on capital inflows and when disrupted inflows creates currency volatility, eventually leading to inflation and investment pressures.
4. India needs manufacturing exports for currency strength (services alone won’t do it)
This is a core trade message. Even if IT/services exports rise, India still needs a strong base of manufacturing exports to reduce trade deficits and strengthen external stability. The Survey almost implies that “Services can fund growth, but goods exports fund stability”. For the trade ecosystem, this is a big signal: The export strategy must include product, scale and logistics sumulteneously and not only “services excellence”.
5. The new trade mantra: build resilience, not dependence
The Survey encourages an explicit resilience doctrine including build buffers, diversify routes, build redundancy, avoid single points of failure and don’t assume global systems will always stay open. This is particularly relevant for import-dependent manufacturing; critical goods and components and exporters relying on 1–2 major markets.
– Manoj Chugh is a senior business and technology leader with over four decades of experience at the intersection of enterprise leadership and public policy. He sits on boards of public firms and advises leadership teams on strategy, technology and policy-led business resilience