Economic Survey’s growth story masks cracks in farms, factories, exports

India may retain its position as the world’s fastest-growing major economy, but the Economic Survey 2025–26 reveals that several core sectors are expanding below their historical trends even as overall GDP growth is projected at a robust 7.4 per cent for FY26.

Tabled in Parliament on Thursday, the survey estimates a sharp acceleration in real GDP growth from 6.5 per cent in FY25 to 7.4 per cent in FY26, crediting sustained domestic reforms and heavy public investment in infrastructure. However, a sector-wise breakdown suggests that this headline performance is being carried disproportionately by services, while agriculture, parts of industry and the external sector continue to underperform relative to their longer-term potential.

Agriculture and allied activities, which support nearly half the population, are projected to grow by just 3.1 per cent in FY26 — well below the sector’s decadal average of 4.45 per cent recorded between FY16 and FY25.

Though growth in FY25 stood at 4.6 per cent, the survey notes that agricultural expansion in the first half of FY26 slowed to 3.6 per cent, reflecting persistent structural constraints in crop productivity. While allied activities such as livestock and fisheries continue to post steady growth of 5–6 per cent, they remain insufficient to offset the broader slowdown in farm output.

Industrial growth, though improving in headline terms, also presents a mixed picture. The industry sector is projected to grow by 6.2 per cent in FY26, marginally higher than 5.9 per cent in FY25. Manufacturing has shown a notable rebound, expanding by 8.4 per cent in the first half of FY26 compared to 4.8 per cent a year earlier. Yet, this surge comes after several years of subdued performance and does not fully compensate for long-term stagnation. Construction, another key employment generator, is expected to moderate to 7.0 per cent in FY26 from a high base of 9.4 per cent in FY25.

The external sector, often a barometer of global competitiveness, also remains below its potential. Real export growth is estimated at 6.4 per cent in FY26, only marginally higher than FY25 and modest when viewed against India’s aspirations of becoming a global manufacturing and export hub.

In contrast, the services sector continues to dominate growth, with output projected to rise by 9.1 per cent in FY26. Financial, real estate and professional services, along with public administration and defence, are expected to grow close to 10 per cent, underscoring the economy’s increasing reliance on services-led expansion.

While the survey raises India’s medium-term potential growth estimate to 7 per cent, the uneven sectoral performance highlights a widening gap between headline growth numbers and the health of the real economy.