![\"Economic](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2026\/01\/127778413.jpg\" "\\"Economic")
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India\u2019s strongest macroeconomic performance in decades has collided with a global system that no longer rewards macroeconomic success. (AI image)<\/p>\n
Economic Survey 2025-26: India stands tall in the global economic order – as the world\u2019s fastest growing major economy that is exhibiting resilience in the face of global economic turmoil and Donald Trump\u2019s tariff threat. Post the imposition of 50% tariffs on India, most economists revised India\u2019s GDP growth forecasts downwards. But surprising, the economy not only held firm, its growth pace actually picked up!\u201cIn reality, growth accelerated due to a slew of structural reforms and policy measures,\u201d the Economic Survey 2025-26 tabled in the Parliament on Thursday says. \u201cFast forward five months, and India is now anticipating a fullyear real growth rate of over 7%, with another year of real growth at or near 7%,\u201d the survey says. <\/p>\n
Economic Survey: FM Sitharaman Sets FY27 Growth At Up To 7.2% As Reforms Lift India\u2019s Outlook<\/p>\n
Yet, as the Economic Survey notes the paradox of 2025 is that India\u2019s strongest macroeconomic performance in decades has collided with a global system that no longer rewards macroeconomic success with currency stability, capital inflows, or strategic insulation.And even though global growth and trade have held up better than expected, few are certain why this is the case. Hence, there is a lingering concern that the negative effects of the ongoing global political and economic turmoil may manifest with a lag.Also Check | Economic Survey 2026 Highlights<\/a>\u201cFragility, uncertainty and episodic shocks are increasingly structural features of the system, and the balance of risks has shifted perceptibly over the past year. Geopolitical competition has intensified, the security environment in Europe has become increasingly complex, and financial vulnerabilities associated with leveraged technology investments are looming,\u201d the Economic Survey warns.Fundamentally, factors that shape the trade policy are changing. It is now majorly about security and political considerations rather than efficiency or multilateral rules. Taken together, these developments suggest a world that is less coordinated, more risk-averse, and more exposed to non-linear outcomes with a narrower margin of safety, the Economic Survey cautions.In this background, it envisages three scenarios for the global economy in 2026, explaining what they in turn would mean for India\u2019s growth story:<\/p>\n Scenario 1: The best-case for the world in 2026<\/p>\n This is the \u2018best-case\u2019 scenario shared by the Economic Survey – which for the world in 2026 would mean \u2018business as in 2025. However, it is increasingly less secure and more fragile.\u201cIn this setting, with the margin of safety being thinner, minor shocks can escalate into larger reverberations. Financial stress episodes, trade frictions, and geopolitical escalations do not lead to systemic collapse, but they do create volatility and require governments to intervene more actively to stabilize expectations,\u201d the Economic Survey explains.According to the Economic Survey, this scenario is less about continuity and more about managed disorder, with countries operating in a world that remains integrated yet increasingly distrustful.\u201cOne could attach a subjective probability of around 40% to 45% to this scenario unfolding in 2026. Reflecting this is the Global Economic Policy Uncertainty Index, which is near its worst readings of 2020, excluding the sharp spike in April 2025 at the introduction of the reciprocal tariffs. Fear lingers,\u201d the survey says.<\/p>\n Scenario 2: Multipolar breakdown<\/p>\n In this scenario, the probability of a disorderly multipolar breakdown rises materially and cannot be treated as a tail risk. \u201cUnder this outcome, strategic rivalry intensifies, the Russia\u2013Ukraine conflict remains unresolved in a destabilising form, and collective security arrangements unravel. Trade becomes increasingly explicitly coercive, sanctions and countermeasures proliferate, supply chains are realigned under political pressure, and financial stress events are transmitted across borders with fewer buffers and weaker institutional shock absorbers,\u201d the Economic Survey cautions.In such a scenario, the policy will become more nationalised, and countries will face sharper tradeoffs between autonomy, growth, and stability. The survey sees a probability of around 40% to 45% to this scenario as well.The Economic Survey points out: On the eve of Christmas 2025, the Financial Times wrote, \u201cTech companies have moved more than $120bn of data centre spending off their balance sheets using special purpose vehicles funded by Wall Street investors, adding to concerns about the financial risks of their huge bet on artificial intelligence.\u201dIt also notes that the IBM CEO openly questioned the economics of Large Language Models (LLM)-based AI. This has reinforced concerns about the financial risks of this huge bet.\u201d Given the leverage involved, a correction could have cascading effects across financial markets and the real economy. The sharp rise in the yields of Japanese Government Bonds is another warning sign,\u201d the survey says.Also Read | How rupee became a victim of geopolitics & a strategic power gap in 2025: Economic Survey explains<\/a><\/p>\n Scenario 3: Systemic shock cascade<\/p>\n The final scenario is the bleakest and has a residual probability of 10%-20%. It involves the risk of a systemic shock cascade – this will mean that the financial, technological, and geopolitical stresses amplify one another rather than unfolding independently. \u201cThe recent phase of highly leveraged AI-infrastructure investment has exposed business models that are dependent on optimistic execution timelines, narrow customer concentration, and long duration capital commitments. A correction in this segment would not end technological adoption, but it could tighten financial conditions, trigger risk aversion and spill over into broader capital markets,\u201d the survey says. In case these developments were to coincide with any geopolitical escalation or trade disruption – it would lead to a sharper contraction in liquidity, a sudden weakening of capital flows, and a shift toward defensive economic responses across regions. \u201cWhile this remains a lower-probability scenario, its consequences would be significantly asymmetric. The macroeconomic consequences could be worse than those of the 2008 global financial crisis,\u201d the Economic Survey warns.<\/p>\n What do these scenarios mean for India?<\/p>\n Running a marathon and sprint at the same time! While the Economic Survey is confident of India\u2019s economic resilience in each scenario, it notes that India\u2019s economy is not free from these external risks.\u201cIn all three scenarios, India is relatively better off than most other countries due to its strong macroeconomic fundamentals, butthis does not guarantee insulation,\u201d it says.What works for India? It\u2019s the advantage of a large domestic market, a less financialised growth model, and strong foreign exchange reserves, and a credible degree of strategic autonomy!\u201cThese features provide buffers in an environment where financial volatility is imminent and geopolitical uncertainty is permanent,\u201d the survey says.However, the Economic Survey is quick to caution that either of the three scenarios deal a common a risk for India: disruption of capital flows and the consequent impact on the rupee. \u201cOnly the degree and the duration will vary. In a world of geopolitical turbulence, this may not be confined to a year but could be a more enduring feature,\u201d the survey warns.So what should India\u2019s response be? According to the Economic Survey, India needs to generate sufficient investor interest and export earnings in foreign currency to cover its rising import bill, as, regardless of the success of indigenisation efforts, rising imports will invariably accompany rising incomes.The survey points out that this has been the historical global experience. \u201cEconomic policy must focus on the stability of supply, the creation of resource buffers, and the diversification of routes and payment systems. 2026 may mark the point at which policy credibility, predictability and administrative discipline cease to be mere virtues and instead become strategic assets in their own right, with lasting relevance,\u201d the survey predicts. Hence the survey advocates an approach where India looks at \u2018strategic sobriety\u2019, rather than \u2018defensive pessimism\u2019.\u201cThe external environment will require India to prioritise both domestic growth maximisation and shock absorption, with a greater emphasis on buffers, redundancy, and liquidity. Put differently, India must run a marathon and sprint simultaneously, or run a marathon as if it were a sprint,\u201d the survey says.<\/p>\n","protected":false},"excerpt":{"rendered":"India\u2019s strongest macroeconomic performance in decades has collided with a global system that no longer rewards macroeconomic success.…\n","protected":false},"author":2,"featured_media":729413,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3090],"tags":[128677,146962,216866,51,2614,216867,1700,16,15],"class_list":{"0":"post-729412","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-ai-bubble","9":"tag-budget-2026","10":"tag-budget-2026-expectations","11":"tag-business","12":"tag-donald-trump-tariffs","13":"tag-economic-survey-2026","14":"tag-economy","15":"tag-uk","16":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115980534268738556","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/729412","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=729412"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/729412\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/729413"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=729412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=729412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=729412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}