Major Highlights of Economic Survey 2025-26

India’s inflation is expected to edge up in the coming fiscal year and remain higher in FY27 than in FY26, even as it stays within the Reserve Bank of India’s target range. This is according to the Economic Survey 2025–26 tabled in Parliament on Thursday.

The survey flagged soft global commodity prices, easing food inflation, and a weaker rupee as key factors shaping the outlook. It pointed to firm prices of metals such as gold, silver, and copper as a counterweight. It also said that the government expects the economy to grow at 6.8%-7.2% in FY 27.

Inflation Set to Rise

The survey said headline inflation and core inflation are both projected to rise in FY27 compared with FY26. It described this as a normalisation of price pressures rather than a sharp resurgence. Official projections and multilateral assessments cited in the document form the basis of this view.

Commodity Prices Offer Relief, Metals Stay Firm

According to the survey, the broad inflation outlook benefits from softer global commodity prices. These have helped ease cost pressures in several segments of the economy. Food inflation has also shown signs of moderation. This has provided some relief after periods of volatility.

The survey also noted that prices of key metals have remained firm. Gold, silver, and copper continue to trade high. These metals generally have a direct and indirect bearing on inflation. This is either through consumption demand or input costs for industries.

The survey also highlighted the rupee’s role. A weaker currency can add to inflation. This can be for commodities priced in dollars. However, the survey suggested that this impact is being offset by the broader trend of easing prices in global markets.

FPIs Turn Volatile

The survey also highlighted heightened volatility in foreign portfolio investment (FPI) flows during FY26. It said FPI trends were shaped by shifting global financial conditions and currency movements, among others.

During the first quarter of FY26, FPIs were net buyers of Indian equities and net sellers of debt. This pattern reversed in subsequent quarters. In Q2 and Q3 of FY26, FPIs moved from being net buyers of equities to net sellers, while turning into net buyers of debt.

As of 13 January 2026, FPIs were net sellers of Indian equities, with cumulative outflows of ₹16,500 crores, the survey said.

Narrow Bond Yields Spreads

The survey also tracked movements in the India–US bond yield spread. It is a reflection of foreign investors assessing returns on Indian debt.

Note that in late May 2025, the spread between 10-year Indian and US government bond yields narrowed to 165 basis points. This happened amid a stronger US dollar and falling Indian yields. The narrowing reduced the relative attractiveness of Indian debt for overseas investors, the survey said.

Later in the year, conditions shifted as global financial dynamics evolved. The survey pointed to changing yield movements and currency trends as factors influencing capital flows.

Survey Comes at an Important Time

The survey’s projections have come at a time when global markets are altering expectations around interest rate cuts, inflation persistence, and capital flows. For India, the combination of stable but rising inflation and volatile FPI trends may set the context for policy choices in FY27.

Investors and policymakers are also analysing the impact of firm metal prices against softer energy and food costs. They are also gauging the influence of a weaker rupee on imported inflation.

What Does It Mean for Sectors and Investors?

For interest-rate-sensitive sectors the survey’s view of inflation normalising rather than falling sharply suggests limited room for aggressive easing. Export-oriented sectors may continue to track currency movements closely. However, companies dependent on metals could face cost pressures if prices remain firm.

Sources:

Livemint

Economic Times

Business Today