Udit Misra writes: Why the Economic Survey has upped India’s potential growth rate
In his weekly column, "GDP: Graphs, Data and Perspectives", Udit Misra writes that factors comprising India's potential GDP growth have shown declining trends in recent years.
4 min readNew DelhiUpdated: Jan 31, 2026 01:22 PM IST
Chief Economic Advisor V Anantha Nageswaran addresses the media during the Economic Survey 2025-26 press conference, in New Delhi, Jan. 29, 2026. (PTI Photo/Arun Sharma)
At a time when India’s economic growth rate (often measured in terms of GDP) is being hotly debated, the latest Economic Survey (led by Chief Economic Advisor V Anantha Nageswaran) has “reassessed” and upped India’s “potential” economic growth rate from 6.5% to 7%.
A country’s potential economic growth rate is different from the better-known annual growth rate. While the Gross Domestic Product growth rate is the rate at which an economy grows in a particular year, the “potential” GDP growth rate tells how fast that economy can grow without triggering unwanted levels of inflation.
Typically, if demand for goods and services expands too fast — what a GDP growth rate essentially is — it results in prices rising too fast for comfort. That’s because supply cannot keep up with demand. Think of potential growth rate as the growth rate that a country should be achieving under normal circumstances: A pace more than the potential growth rate comes with the risk of higher inflation, and a growth rate less than the potential rate implies that the country is not fully optimising its resources.
It follows that to raise a country’s GDP growth rate in a sustainable manner, the government must attempt to raise the potential growth rate. The potential growth rate, in turn, depends on three main factors (see TABLE).
Potential GDP growth. (Economic survey figures)
One, the capital stock in the economy. This refers to all the physical assets in the country — roads, bridges and machinery etc. — that can generate growth.
Two, the labour input. This refers not just to the number of people but also their capacity, their skills.
Three, total factor productivity (TFP). This refers to the efficiency with which labour and capital are used in an economy.
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Research from RBI has shown that India’s potential growth rate had been falling over the years. In the 2003-2008 phase, which was India’s highest growth period ever, the potential growth rate was 8%. Between 2009 and 2015, it fell to 7%. By 2023, even the CEA acknowledged that around the time the Covid-19 pandemic hit India, the potential growth rate had fallen to 6.5%.
In the latest survey, however, the CEA notes that “cumulative impact of policy reforms over recent years appears to have lifted the economy’s medium-term growth potential closer to 7 per cent”.
The survey specifically notes the reforms “over the past three years” that have enhanced India’s potential. These include manufacturing-oriented initiatives — such as the Production-Linked Incentive (PLI) schemes, FDI liberalisation, and logistics reforms — that have helped boost India’s ability to produce more (read supply).
On the labour front, the survey finds that “labour law consolidation, reduced regulatory compliance and State-level regulatory reforms have begun to lower frictions in the labour market. At the same time, sustained investments in education, skilling and the apprenticeship ecosystem are strengthening workforce quality and employability.”
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The survey points out that international experience shows that such “step-ups in potential growth are most credible when reforms are persistent rather than episodic, and when macroeconomic stability is maintained.” While domestically, “India fulfils both these conditions” the survey does end with the caveat that geopolitical conflicts and their ill-effects have the ability to hold India back from achieving its potential.
Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster.
Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad.
Professional Focus
He writes three regular columns for the publication.
ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments.
GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week.
Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old.
Recent Notable Articles (Late 2025)
His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections:
Currency and Macroeconomics:
"GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy.
"GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025).
"Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025).
Global Geopolitics and Trade:
"Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025).
"The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book.
"ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025).
Domestic Policy and Data:
"GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025).
"ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets.
"GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025).
International Economic Comparisons:
"GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025).
"On the loss of Europe's competitive edge" (Oct 17, 2025).
Signature Style
Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities.
You can follow him on X (formerly Twitter) at @ieuditmisra
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Potential GDP growth. (Economic survey figures)
