Economic Survey 2026: Key Insights and Growth Outlook for the Industrial Sector

Union Finance Minister Nirmala Sitharaman presented the Economic Survey 2026 on Thursday, January 29, offering a comprehensive assessment of India’s economic performance amid global uncertainty. While geopolitical tensions, supply chain disruptions, and fiscal pressures continue to affect the global economy, India has maintained strong growth momentum in FY 2025-26.

The survey highlights the strength of domestic demand, steady capital formation, and the resilience of services as the primary growth engine. Simultaneously, manufacturing activity has improved, and agriculture has provided stability despite structural challenges. Together, these trends reinforce India’s position as one of the fastest-growing major economies globally.

Let’s delve into the key highlights of the Economic Survey 2026 and explore its detailed insights.

Also Read: World Economic Forum 2026: What Davos Signals for India’s Investment Cycle

Macroeconomic Indicators

The global economic environment remains volatile, shaped by uneven growth and inflation across major economies. However, the Economic Survey 2026 notes that India has continued to outperform global peers. According to the First Advance Estimates, India’s real GDP is projected to grow at 7.4%in FY 2025-26, largely driven by domestic demand. Private consumption and capital formation remain key contributors, while services continue to dominate on the supply side. Meanwhile, manufacturing activity has strengthened, and agriculture has supported overall stability.

Industrial Sector in the Economic Survey 2026

Despite persistent global headwinds, India’s industrial sector regained momentum in FY 2025–26. Industry Gross Value Added (GVA) grew by 7.0% year-on-year (YoY) in real terms during the first half of FY 2025-26, compared to 5.9% growth in FY 2024-25.

Under the Production-Linked Incentive (PLI) scheme, actual investments exceeding 2.0 Lakh INR-Crore were realised by September 2025. Cumulative incentives worth 23,946 INR-Crore were disbursed across 12 sectors. This growth was led primarily by electronics, pharmaceuticals, and telecom equipment.

Core Input Industries

Cement Industry Performance – Economic Survey 2026

India remains the world’s second-largest cement producer after China. The cement industry comprises 160 integrated plants, 130 grinding units, and 62 mini plants, with an installed capacity of 690 Million-Tonnes. In FY 2024-25, cement production reached 453 Million-Tonnes. Nearly 85% of capacity is concentrated across Rajasthan, Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, Gujarat, Tamil Nadu, Maharashtra, Uttar Pradesh, Chhattisgarh, and West Bengal.

Steel

Between April and October 2025–26, crude steel production grew by 11.7%, finished steel production increased by 10.8%, and consumption rose by 7.8%. Under the PLI Scheme for Specialty Steel, cumulative investment reached 23,022 INR-Crore, with production of 2.34 Million-Tonnes of specialty steel by October 2025.

Capital Goods

To enhance competitiveness, the government launched Phase II of the Scheme on Enhancement of Competitiveness in the Indian Capital Goods Sector in 2022. The scheme focuses on technology identification, advanced centers of excellence, testing infrastructure, and skilling. As of November 2025, 29 projects worth 891.37 INR-Crore were sanctioned, with government support of 714.64 INR-Crore.

Automobile Industry Trends in the Economic Survey 2026

The automotive industry remains a major growth driver. India is now the world’s largest market for two-wheelers and three-wheelers, and the third-largest for passenger and commercial vehicles. Production grew by nearly 33% between FY 2014-15 and FY 2024-25, supported by strong demand recovery. To accelerate electric mobility, the government introduced the PLI Scheme for Advanced Chemistry Cell (ACC) Battery Storage, with an outlay of 18,100 INR-Crore for 50 GWh capacity. So far, 40 GWh capacity has been awarded, strengthening the EV ecosystem.

Electronics Manufacturing

India’s electronics sector has undergone a structural shift, rising from the seventh-largest export category in FY 2021-22 to the third-largest and fastest-growing by FY 2024-25. To strengthen domestic manufacturing, the government launched the Electronics Component Manufacturing Scheme (ECMS) in April 2025, with an outlay of 22,919 INR-Crore. Additionally, Electronics Manufacturing Clusters (EMC and EMC 2.0) continue to provide plug-and-play infrastructure. As of September 2025, the government has approved 3 clusters and common facilities.

Pharmaceuticals and Medical Devices Outlook

India’s pharmaceutical industry is the third-largest globally by volume, supplying nearly 20% of global generics demand. In FY 2024-25, exports reached 191 countries, while India ranked 11th globally by export value. Medical device exports rose from 2.5 US$-Billion in FY21 to 4.1 US$-Billion in FY25. To support growth, the government approved three bulk drug parks and medical device parks across Gujarat, Himachal Pradesh, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, and Madhya Pradesh.

Textiles Industry: Structural Reforms and Export Outlook

The Indian textile and apparel industry, valued at approximately 179 US$-Billion, contributes nearly 2% of GDP and around 11% of manufacturing GVA. India ranks as the sixth-largest exporter of textiles and apparel globally, with a share of about 4% of world exports. Textile and apparel exports, including handicrafts, increased to 37.75 US$-Billion in FY 2024-25, up from 35.87 US$-Billion in FY 2023-24, reflecting a gradual recovery in global demand.

MSME Contribution to India’s Economy

MSMEs form the backbone of India’s industrial economy. They contribute 35.4% to manufacturing, 48.58% to exports, and 31.1% to GDP, as highlighted in the Economic Survey 2026.

Manufacturing in Tier-2 and Tier-3 Cities

Manufacturing in India is steadily moving beyond metro cities into Tier-2 and Tier-3 locations. These cities offer clear cost advantages, including affordable land, lower real estate prices, and reduced wage levels. Moreover, their proximity to raw material sources strengthens supply-chain efficiency. Consequently, Tier-2 and Tier-3 cities are emerging as strong engines of job creation and long-term economic growth. They also help ease pressure on overcrowded metropolitan regions.

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Conclusion and Outlook

India’s industrial performance reflects a clear shift from capacity creation to capability deepening. Manufacturing growth is no longer concentrated in a few metro-driven clusters but is increasingly distributed across Tier-2 and Tier-3 cities. This is further strengthening supply chains while reducing regional imbalances. Key sectors such as automobiles, electronics, textiles, and pharmaceuticals continue to expand. Domestic demand, export growth, and targeted policy support are driving this momentum. Meanwhile, Production-linked incentive schemes and infrastructure upgrades remain critical enablers. This convergence of industrial expansion and spatial diversification signals a more resilient and broad-based industrial framework. However, sustaining this momentum will depend on execution consistency, skill development, and continued integration of smaller cities into national and global manufacturing networks.

For more detailed insights, you can access the full document INDUSTRY: SMALL AND MEDIUM MATTERS.

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