Content

1. Economic Survey 2025–26
2. Connectivity Projects under the Northeast Economic Corridor (NEEC)

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Economic Survey 2025–26

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Context

• Economic Survey 2025–26, tabled ahead of Union Budget, projects robust medium-term growth, historically low inflation, strong fiscal credibility, and resilient financial buffers despite adverse global economic conditions.

Background and context

• The Economic Survey is an annual, non-statutory policy document prepared by the Chief Economic Adviser, offering macroeconomic assessment, risk analysis, and reform priorities guiding fiscal and monetary policymaking.

Relevance

• GS 3 (Economy): GDP growth projections, inflation management, fiscal consolidation, capital expenditure, banking sector health, trade performance, external sector resilience, and financial inclusion.

State of the Indian economy: macro overview

Growth outlook

• India’s real GDP growth for FY27 is projected at 6.8–7.2%, with potential growth estimated around 7%, reflecting sustained demand, investment momentum, and structural reforms amid global uncertainty.
• First Advance Estimates indicate FY26 GDP growth at 7.4% and GVA growth at 7.3%, supported by agriculture recovery, manufacturing acceleration, and services-led expansion.

Inflation trends

• India recorded historic low CPI inflation averaging 1.7% during April–December 2025, driven by food and fuel disinflation, making it one of the sharpest inflation declines among EMDEs.
• RBI revised FY26 inflation forecast downward from 2.6% to 2.0%, while IMF projects 2.8% in FY26 and 4.0% in FY27, indicating a benign inflation outlook.

Sectoral drivers of growth

Agriculture and allied activities

• Agriculture is estimated to grow 3.1% in FY26, stabilising rural demand, supported by favourable monsoon, improved crop yields, and agricultural GVA growth of 3.6% in H1 FY26.
• Allied sectors like livestock and fisheries recorded stable 5–6% growth, enhancing income diversification, resilience, and reducing agriculture’s vulnerability to climatic shocks.

Industry and manufacturing

• The industrial sector is projected to grow 6.2% in FY26, with H1 growth of 7.0%, exceeding pre-COVID trends, signalling broad-based industrial recovery.
• Manufacturing GVA surged 7.72% in Q1 and 9.13% in Q2 FY26, reflecting structural revival driven by PLI schemes, infrastructure push, and improved corporate balance sheets.
• PLI schemes across 14 sectors attracted over ₹2 lakh crore investment, generated ₹18.7 lakh crore incremental output, and created 12.6 lakh jobs by September 2025.

Services sector

• Services grew 9.1% in FY26, with GDP share rising to 53.6% and GVA share to a historic 56.4%, underlining India’s transition towards a services-driven economy.
• India became the 7th largest services exporter, doubling its global share from 2% (2005) to 4.3% (2024), led by IT, financial, and professional services.

Employment and labour market trends

• Total employment reached 56.2 crore persons in Q2 FY26, with net addition of 8.7 lakh jobs, reflecting labour market resilience amid economic expansion.
• PLFS data shows LFPR at 56.1%, female LFPR at 35.3%, WPR at 53.4%, and unemployment declining to 4.8%, indicating improved labour absorption.
• Organised manufacturing employment rose 6% YoY in FY24, adding over 10 lakh jobs, confirming industrial recovery translating into formal employment generation.

Trade and external sector performance

• India’s total exports reached USD 825.3 billion in FY25 and USD 418.5 billion in H1 FY26, driven primarily by services and non-petroleum exports.
• Services exports hit a record USD 387.5 billion in FY25, growing 13.6% YoY, reinforcing India’s global competitiveness in knowledge-intensive sectors.
• India’s share in global merchandise exports rose from 1% (2005) to 1.8% (2024), reflecting gradual integration into global trade networks.

External buffers

• Foreign exchange reserves stood at USD 701.4 billion (January 2026), providing 11 months import cover and covering 94% of external debt, strengthening external shock absorption capacity.
• India remained the world’s largest remittance recipient with USD 135.4 billion inflows in FY25, increasingly sourced from advanced economies, reflecting skilled workforce migration.

Industrial output indicators

• Index of Industrial Production (IIP) grew 7.8% in December 2025, highest in over two years, driven by manufacturing growth of 8.1%, mining 6.8%, and electricity 6.3%.
• Eight Core Industries Index showed strong momentum, with cement growth at 13.5% and steel at 6.9%, reflecting sustained infrastructure and construction demand.

Fiscal developments

Strengthened fiscal credibility

• India received three sovereign credit rating upgrades in 2025, reflecting improved fiscal discipline, revenue buoyancy, and commitment to capital-led growth.

Revenue and taxation

• Centre’s revenue receipts increased from 8.5% of GDP (FY16–20) to 9.2% of GDP in FY25, supported by buoyant non-corporate tax collections.
• Direct taxes’ share rose to 58.8% of total taxes in FY25, with income-tax filers increasing from 6.9 crore (FY22) to 9.2 crore (FY25).

Capital expenditure and debt

• Effective capital expenditure rose to 4% of GDP in FY25, sustaining growth while reducing general government debt-GDP ratio by 7.1 percentage points since 2020.
• Under Special Assistance to States for Capital Investment (SASCI), States maintained capital spending at 2.4% of GDP, supporting cooperative fiscal federalism.

Monetary and financial sector developments

Monetary policy and liquidity

• RBI reduced repo rate by 100 basis points to 5.25% during April–December 2025, complemented by CRR cut to 3%, enhancing credit availability.
• System liquidity remained in surplus at ₹1.89 lakh crore in FY26, aided by OMOs and forex swaps, supporting monetary transmission.

Banking sector health

• Gross NPAs declined to multi-decadal lows, with CRAR at 17.2%, ROE at 12.5%, and ROA at 1.3%, indicating strong banking sector fundamentals.
• Bank credit growth accelerated to 14.5% YoY in December 2025, with MSME credit expanding 21.8%, especially micro and small enterprises.

Financial inclusion and capital markets

• RBI Financial Inclusion Index improved from 64.2 (March 2024) to 67.0 (March 2025), reflecting enhanced access, usage, and quality of financial services.
• Household financialisation deepened, with equity and mutual funds share rising to 15.2% of savings in FY25, and household equity wealth increasing ₹53 lakh crore since 2020.

Conclusion: mains-ready synthesis

• Economic Survey 2025–26 portrays India as a resilient, high-growth economy with strong macro fundamentals, low inflation, robust fiscal credibility, deepening financial markets, and capacity to withstand global shocks while sustaining inclusive growth.

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Connectivity Projects under the Northeast Economic Corridor (NEEC)

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Why is it in news?

• In January 2026, the Government informed Parliament about progress under the Northeast Economic Corridor, PM-DevINE projects, and major road, rail, and digital connectivity expansion across the North-Eastern Region.

Relevance

• GS 2 (Polity / Governance): Cooperative federalism through NEC and HLTFs, Centre–State coordination, role of DoNER, digital governance via monitoring portals, and implementation capacity.
• GS 3 (Infrastructure / Regional Development / Security): Roads, railways, digital connectivity, PM-DevINE, logistics efficiency, employment generation, Act East Policy linkage, and strategic border connectivity.

Background and context

Strategic importance of the North-Eastern Region (NER)

• The North-East is strategically vital due to its international borders, Act East Policy relevance, security sensitivities, and historical infrastructure deficit, making connectivity central to integration and development.

Institutional trigger

• During the 72nd Plenary of the North Eastern Council (NEC) in December 2024, consensus led to creation of sector-specific High-Level Task Forces to accelerate economic transformation.

Northeast Economic Corridor (NEEC)

High-Level Task Force on NEEC

• A dedicated High-Level Task Force on NEEC, convened by the Chief Minister of Mizoram, was constituted to assess infrastructure gaps, investment ecosystem, and formulate corridor-based development strategies.
• The Task Force includes the Union DoNER Minister and Chief Ministers of Assam, Meghalaya, and Manipur, ensuring cooperative federalism and regional coordination in corridor planning.

Mandate and objectives

• The NEEC Task Force focuses on evaluating existing economic infrastructure, identifying logistics and connectivity gaps, and recommending policy measures to attract private investment into the North-East.

PM-DevINE scheme: development backbone

Objectives of PM-DevINE

• PM-DevINE aims at rapid and holistic development of NER through infrastructure creation, social sector projects, livelihood enhancement for youth and women, and bridging long-standing regional development gaps.

Project scale and funding

• Since inception, 48 projects worth ₹6,044.36 crore have been sanctioned under PM-DevINE up to January 2026, reflecting focused public investment in the North-East.

Road connectivity expansion

National Highways growth

• National Highway length in NER expanded from 10,905 km in 2014 to 16,207 km by April 2025, significantly improving inter-state and national connectivity.
• Currently, 177 highway projects covering 3,635 km, costing ₹87,119 crore, are under various stages of implementation across the region.

Rural roads under PMGSY

• Under PMGSY, 17,666 road works spanning 89,503 km and 2,396 bridges were sanctioned, strengthening last-mile connectivity in remote and hilly areas.
• Of these, 16,547 road works (81,448 km) and 2,126 bridges have been completed, with total expenditure of ₹53,353.49 crore, including State contributions.

Connectivity projects under MDoNER

• MDoNER sanctioned 647 road and bridge projects worth ₹8,260.88 crore, of which 500 projects costing ₹4,915 crore have already been completed, accelerating regional mobility.
• These projects focus on inter-district connectivity, border area access, and linking production clusters with markets, particularly in difficult terrain.

Rail connectivity in the North-East

Status of railway projects

• As of April 2025, 12 railway projects (8 new lines and 4 doubling projects) spanning 777 km and costing ₹69,342 crore were sanctioned in the North-East.
• Out of the sanctioned length, 278 km has been commissioned, improving passenger mobility, freight movement, and integration with national rail networks.

Structural constraint

• Railway projects are executed on a zonal basis, not State-wise, reflecting cross-boundary nature but also complicating coordination and monitoring in the North-East.

Digital connectivity expansion

BharatNet progress

• Under BharatNet, 6,355 Gram Panchayats in the North-East were made service-ready for high-bandwidth broadband connectivity by December 2025.

Mobile connectivity

• Under the 4G Saturation Project and allied schemes, 3,718 mobile towers have been commissioned, covering 5,366 villages and locations, reducing digital isolation.

Monitoring and governance mechanisms

Multi-layered monitoring framework

• Primary monitoring responsibility lies with State governments and implementing agencies, while DoNER oversees projects through Field Technical Support Units, Project Quality Monitors, and third-party inspections.
• Inspection reports are uploaded on the Poorvottar Vikas Setu portal, enabling transparent, real-time digital monitoring and accountability.

Integration with PM Gati Shakti

• Field units update project progress on the PM Gati Shakti National Master Plan portal, ensuring inter-ministerial coordination and reducing infrastructure silos.

Implementation challenges

• Project timelines are affected by difficult terrain, land acquisition constraints, statutory clearances, forest approvals, and logistical bottlenecks, common in the ecologically sensitive North-East.

Economic and strategic benefits

Economic integration and growth

• Improved connectivity enables faster movement of agricultural produce, essential goods, and industrial inputs, lowering logistics costs and enhancing market access for North-Eastern States.

Employment and livelihoods

• Infrastructure expansion generates direct construction employment and indirect opportunities in tourism, logistics, agro-processing, and small industries, supporting inclusive regional growth.

Strategic and social integration

• Enhanced connectivity strengthens national integration, improves border area accessibility, boosts security logistics, and aligns the North-East more closely with India’s economic mainstream.

Way forward: policy focus

• Corridor-based planning under NEEC should be aligned with Act East Policy, cross-border trade potential, and value-chain development to convert connectivity into sustained economic transformation.
• Greater private sector participation, faster clearances, and environmentally sensitive infrastructure design are essential to maximise returns on connectivity investments.

Mains-ready takeaway

• The Northeast Economic Corridor, supported by PM-DevINE and multi-sectoral connectivity expansion, marks a shift from infrastructure deficit correction to growth-oriented regional integration, strengthening economic, strategic, and social cohesion in the North-East.