Finance Minister Nirmala Sitharaman
New Delhi: The government is well on track to meet the fiscal deficit target of 4.4 per cent of GDP estimated for the current financial year based on broad trends, the Economic Survey 2025-26 tabled in Parliament on Thursday, January 29, said.
According to the survey prepared by Chief Economic Advisor V Anantha Nageswaran, the central government’s fiscal trajectory stands out for combining consolidation with sustained public investment, earning three sovereign rating upgrades this year.
Between FY20 and FY25 (Provisional Actual), the share of capital spending in the total central government expenditure increased from about 12.5 per cent to 22.6 per cent, while effective capex as a share of GDP rose from roughly 2.6 per cent to 4 per cent, the survey said.
Even as states are overshooting their revenue deficit, the central government, through its Special Assistance to States for Capital Expenditure/Investment (SASCI), has successfully incentivised states to maintain capital expenditure at around 2.4 per cent of GDP, it said, adding the expansion of unconditional cash transfers across several states has contributed to rising revenue expenditure, with implications for fiscal space and public investment at the state level.
As of November 2025, the Union government’s fiscal deficit stood at 62.3 per cent of the Budget Estimates, it said.
It is to be noted that the government overachieved its fiscal deficit target of 4.8 per cent of GDP, against the 4.9 per cent of GDP pegged for FY25.
The fiscal deficit declined from a high of 9.2 per cent of GDP in FY21 to 4.8 per cent in FY25 and is budgeted at 4.4 per cent in FY26.
Over the same period, the survey said, the revenue deficit as a proportion of GDP has narrowed steadily, reaching its lowest level since FY09, thereby leaving a greater allocation for capex and reflecting a sustained improvement in the quality of expenditure.
The document, tabled in Parliament by Finance Minister Nirmala Sitharaman, mentioned that India’s ethanol-blended fuel programme has saved the country more than Rs 1.44 lakh crore in foreign exchange and replaced about 245 lakh metric tonnes of crude oil as of August 2025.
But the rapid expansion is creating unintended consequences, it warned.
Government pricing policies that favour maize-based ethanol are driving farmers to shift away from pulses and oilseeds, raising concerns about long-term food security and nutrition.
The ethanol programme has expanded beyond traditional sugar-based feedstock to include food grains, particularly maize, as India works toward its E20 blending target — mixing 20 per cent ethanol with petrol.
The survey also called for a “modest increase” in the retail price of urea — unchanged since March 2018 at Rs 242 per 45-kg bag — while transferring an equivalent amount directly to cultivators on a per-acre basis.
The proposed shift from input subsidy to income support aims to correct a three-decade-old imbalance in fertiliser use that is degrading soil quality and undermining crop yields, the document stated.
The Survey flagged that the nitrogen-phosphorus-potassium (N:P:K) ratio used by Indian farmers has deteriorated sharply from 4:3.2:1 in 2009-10 to 10.9:4.1:1 in 2023-24, driven by excessive nitrogen application through subsidised urea. Agronomic benchmarks suggest a ratio closer to 4:2:1 for most crops and soil types.
Under the survey’s proposed approach, farmers would receive the same overall purchasing power, but nitrogen’s relative price would move closer to its agronomic cost. Those applying nitrogen efficiently would gain by receiving the full transfer while spending less at retail counters. Over-users would face clear incentives to shift towards balanced fertilisation, soil testing, nano-urea and organic amendments.
Gold and silver prices are expected to remain at elevated levels amid persisting global uncertainties, unless a durable peace is established and trade wars are resolved, the survey said.
It highlighted that both gold and silver touched lifetime highs during 2025, reflecting heightened global uncertainty and strong safe-haven demand.
The rally was buoyed by a weakening US dollar, expectations of persistently negative real rates, and the market’s growing assessment of geopolitical and financial tail risks.
Stating that about 40 per cent of gig workers in India earn below Rs 15,000 per month, the survey also called for significant policy interventions in the gig economy, suggesting the setting of “minimum per-hour or per-task earnings”, which includes compensation for waiting time, to ensure fair wages and reduce the cost disparity between regular and gig employment.
Identifying limited access to productive assets as a major hurdle for upward mobility, the survey suggested that platforms and employers should be encouraged to “co-invest” in assets and training.
It argued that such co-investment would help workers progress into more secure, higher-quality jobs.
Effective implementation of Labour Codes will play a key role in boosting formal employment and enhancing security for women and gig workers, the Economic Survey stated.
The four codes, notified on November 21, 2025, are expected to be in place in the next few months.
While the Codes offer a unified framework, it is up to the private sector to integrate this framework into daily operations, it further suggested.
The draft rules under the four codes — Code on Wages, 2019, Industrial Relations Code, 2020, Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 — were pre-published on December 31, 2025, for stakeholder comments.
The pharmaceutical sector, which had expanded under the process-patent regime of the 1970 Patent Act, faced a sudden change in its operating environment when the TRIPS-compliant product-patent regime took effect in 1995, the Economic Survey stated.
However, the manner in which the sector responded offers a compelling template for industries currently confronting rising external trade barriers, especially tariff escalations in major markets, it added.
The earliest and most important response to the TRIPS (Trade-Related Aspects of Intellectual Property Rights) shock was a clear shift toward developing internal capabilities, and the Indian pharmaceutical companies moved beyond simple process improvements, the survey said.
“In the current situation of an unpredictable global tariff regime, India Inc can draw inspiration from the pharmaceutical sector to capitalise on this situation to its advantage.
“India Inc must focus on capability building through strong R&D, Market diversification to reduce dependence on a single market and build resilience, and partnership-driven models such as co-development, licensing, and contract manufacturing to help reduce risk,” the Economic Survey stated.
The survey also said that the value of the rupee, which has slipped to the 92 per dollar mark, does not accurately reflect India’s stellar economic fundamentals.
“In other words, the rupee, therefore, is punching below its weight,” it said, adding investor reluctance to commit funds to India warrants examination at a time when inflation is under control and growth outlook is favourable.
India depends on foreign capital flows to maintain a healthy balance of payments.
“The Indian rupee underperformed in 2025. India runs a trade deficit in goods. Its net trade surplus in services and remittances is not enough to offset it… When they run drier, rupee stability becomes a casualty,” said the pre-Budget document tabled in Parliament by Finance Minister Nirmala Sitharaman.
The rupee hit an all-time low of 92.00 against the American currency in early trade on Thursday, weighed down by steady dollar demand and a cautious global mood.
The Survey observed that the growth is good; outlook remains favourable; inflation is contained; rainfall and agricultural prospects are supportive; external liabilities are low; banks are healthy; liquidity conditions are comfortable; credit growth is respectable; corporate balance sheets are strong; and the overall flow of funds to the commercial sector is robust.
“Of course, it does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now.
“However, it does cause investors to pause,” the survey said.
The Rajya Sabha was adjourned for the day after tabling of the Economic Survey 2025-26. The Union Budget for 2026-27 will be presented by the Finance Minister on Sunday, February 1.
(With inputs from PTI.)
This post was last modified on January 29, 2026 4:52 pm