Question 1

The policy recommendations made in the Economic Survey are legally binding on the Union Budget.

Accepted Answer

The Survey serves strictly as an advisory and analytical review document; the Government is not obligated to implement its policy recommendations in the ensuing Union Budget.

Question 2

The Economic Survey is drafted by the Reserve Bank of India (RBI) or the Finance Commission.

Accepted Answer

It is prepared by the Economic Division of the Department of Economic Affairs (DEA) within the Ministry of Finance, under the supervision of the Chief Economic Adviser (CEA).

Question 3

A decrease in Private Final Consumption Expenditure (PFCE) is always good because it means citizens are saving more money.

Accepted Answer

In a developing macroeconomic framework like India's, a high or rising PFCE (like the 61.5% highlighted in the Survey) is highly positive as it indicates robust domestic demand, which drives corporate revenue, investment, and GDP growth.

Question 4

Consider the following statements regarding the Economic Survey 2025-26:
1. It reported that Private Final Consumption Expenditure (PFCE) fell to its lowest level since 2011-12 due to inflationary pressures.
2. It described the macroeconomic situation as a 'Goldilocks' moment characterized by high GDP growth and historic low retail inflation.
3. It noted a structural agricultural shift where horticulture production has surpassed total foodgrain production.
How many of the statements given above are correct?

Accepted Answer

(b) Only two — Statement 1 is incorrect: The Survey highlighted that PFCE reached 61.5% of GDP, the *highest* level since 2011-12, supported by rising real purchasing power. Statement 2 is correct: Retail inflation fell to 1.7% in April-Dec FY26 alongside 7.4% GDP growth, creating a Goldilocks scenario. Statement 3 is correct: Horticulture production (362.08 MT) continues to lead and surpass traditional foodgrains.

Question 5

Match List I (Macroeconomic Indicator in Economic Survey 2025-26) with List II (Reported Value/Observation):
List I:
A. Real GDP Growth (FY26 Est.)
B. Retail Inflation (Apr-Dec FY26)
C. Foreign Exchange Reserves
D. Medium-term potential growth rate
List II:
1. ~ USD 701.4 Billion
2. 7.4%
3. 7.0%
4. 1.7%
Select the correct answer using the code given below:

Accepted Answer

(a) A-2, B-4, C-1, D-3 — According to the Economic Survey 2025-26: Real GDP growth for FY26 is estimated at 7.4% (A-2). Retail inflation (CPI) dropped to a historic low of 1.7% in April-Dec (B-4). Forex reserves stood at USD 701.4 billion (C-1). The medium-term potential growth rate was formally anchored at 7.0% (D-3).

Question 6

Assertion (A): The Economic Survey 2025-26 explicitly warned against the rapid expansion of unconditional cash transfers by state governments.
Reason (R): In revenue-deficit states, excessive expenditure on unconditional cash transfers crowds out productive capital expenditure, thereby risking fiscal sustainability.
Select the correct answer:

Accepted Answer

(a) Both A and R are true and R is the correct explanation of A — Both statements are factually correct. The Survey specifically flagged state-level fiscal populism, noting that unconditional cash transfers (totaling approx Rs 1.7 lakh crore) pose a major macroeconomic risk. The reason is that diverting these funds away from Gross Fixed Capital Formation (infrastructure Capex) towards immediate consumption increases sovereign borrowing costs and harms long-term growth. Thus, R correctly explains A.

Economic Survey 2025-26 Tabled in Parliament

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