From stability to strategic indispensability: What the Economic Survey sets up for Budget Sunday

The Economic Survey 2025-26 arrives with an unusual degree of calm. Inflation, it says, is likely to remain muted in the medium term. Growth prospects remain healthy, though revised. Banks are stable, balance sheets are stronger, and domestic demand continues to hold up even as the global economy grows more uncertain.

That calm matters. It changes the nature of the conversation as India heads into the Union Budget that Finance Minister Nirmala Sitharaman will present on Sunday, February 1. This is no longer a Budget framed by crisis management; rather one framed by choice. The Survey revises India’s potential growth rate upwards to 7 percent, reflecting years of sustained public investment, infrastructure expansion, logistics reform and financial sector clean up. High frequency indicators show firming investment momentum and resilient consumption. Core inflation remains subdued, signalling that supply side improvements are finally anchoring prices rather than monetary tightening alone.

Yet the document is careful not to confuse macro stability with strategic security. The global environment has shifted. Trade is no longer governed primarily by efficiency or multilateral rules. It is shaped by geopolitics, security considerations and fragmented supply chains. Capital flows are volatile. Currency markets are unforgiving. Even economies with strong fundamentals are discovering that stability no longer guarantees insulation.

India is not immune to this shift. Despite solid growth and contained inflation, the rupee has underperformed. The underlying reason is structural. India continues to run a goods trade deficit and depends on foreign capital inflows to finance it. Services exports and remittances provide a cushion, but they do not fully offset the imbalance. In a world of heightened geopolitical risk, this dependence becomes a strategic vulnerability.

This is where the Economic Survey pushes the debate beyond self reliance. Building domestic capability is necessary, but it is no longer sufficient. The larger ambition, it argues, must be to make India strategically indispensable to the global economy.

Manufacturing sits at the centre of this argument. Services have powered India’s rise for two decades, delivering growth, jobs and foreign exchange. But manufacturing does something more fundamental. It forces institutional discipline. It exposes weaknesses in logistics, energy pricing, regulation and skills. It ties export competitiveness to currency stability and state capacity in ways services often do not.

Countries with durable strategic influence and stable currencies, the Survey notes, have almost always built that strength on manufacturing depth. India’s own export data underlines the challenge. Services exports have grown faster than merchandise exports in recent years. While creditable, this divergence also explains why external vulnerability persists.

Recent trade agreements, including the concluded free trade agreement with the European Union, signal intent. They expand market access for labour intensive exports and integrate India more closely with advanced manufacturing ecosystems. But agreements alone do not confer competitiveness. They merely test it. Producing at scale, at predictable cost and with reliable delivery remains the harder task.

That task places a premium on state capacity. The Survey’s idea of an entrepreneurial state is not about replacing markets or commercialising governance. It is about credibility, execution and regulatory discipline. Mission mode platforms in semiconductors, green hydrogen and digital public infrastructure offer early signals of what this approach can achieve.

The private sector, too, is called upon to rethink its role. Seeking negotiated protection may offer short term comfort, but it raises input costs and weakens downstream competitiveness. In a contested global system, corporate competitiveness becomes part of national strategy whether firms acknowledge it or not.

As Budget Sunday approaches, the Survey frames a clear choice for policymakers. Stability has been earned. Inflation is anchored. Fiscal consolidation has credibility. The temptation is to prioritise visible short term relief. The harder, more consequential path is to invest further in capacity, manufacturing competitiveness, cost of capital reduction, energy pricing reform, logistics efficiency and skills.

The Budget, then, is not just a fiscal exercise. It is a signal of intent. The Economic Survey makes clear that India is running a marathon in a world that increasingly demands sprinting. The coming Budget will show whether the country is prepared to do both, deliberately and with an eye firmly on the decade ahead.

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