Economic Survey 2025-26 projects growth of 6.8 to 7.2% for 2026-27
29 January 2026
Finance Minister Nirmala Sitharaman tabled the Economic Survey 2025-26 on 29 January 2026. Prepared under Chief Economic Adviser V. Anantha Nageswaran, it projected real GDP growth of 6.8 to 7.2% in 2026-27 and put the economy's medium-term potential at around 7%. It noted that retail inflation had averaged 1.7% in April-December 2025, the lowest since the CPI series began, and warned of risks from slower global growth, trade disruption and a possible shock from heavily leveraged AI investment.
Background. The Economic Survey is prepared by the Economic Division of the Department of Economic Affairs and presented the day before the Budget. Unlike the Budget, it is not a constitutional requirement.
Why CLAT asks: Who prepares the Survey, and that it is not constitutionally required, are classic distractors.
Source: Outlook Business: Economic Survey 2025-26 projects growth at 6.8-7.2% for FY27
Union Budget 2026-27: fiscal deficit target of 4.3% of GDP
1 February 2026
Presenting the Budget for 2026-27 on 1 February 2026, the Finance Minister put the fiscal deficit for 2025-26 at 4.4% of GDP and set 4.3% for 2026-27. Central government debt is estimated at 55.6% of GDP in 2026-27, with a goal of about 50% by 2030-31. Total expenditure is estimated at ₹53.5 lakh crore and net tax receipts at ₹28.7 lakh crore. The speech also recorded that the Government had accepted the 16th Finance Commission's recommendation to keep the States' share of central taxes at 41%.
Background. Article 112 requires an 'Annual Financial Statement' for each year; the word 'Budget' does not appear in the Constitution. The fiscal deficit is the gap between total expenditure and total receipts excluding borrowings. The FRBM Act, 2003 sets the fiscal-responsibility framework.
Why CLAT asks: Concepts beat decimals: know what the fiscal deficit measures and where the Budget sits in the Constitution.
Source: Budget Speech 2026-27, paras 91-97
16th Finance Commission: 41% to the States, and GDP contribution enters the formula
1 February 2026
The 16th Finance Commission, chaired by Arvind Panagariya, submitted its report on 17 November 2025, and it was tabled in Parliament on 1 February 2026. For 2026-27 to 2030-31 it kept the States' share of the divisible pool of central taxes at 41%. For dividing that share among States, it replaced the 'tax and fiscal effort' criterion with a new one, contribution to GDP, weighted at 10%, the first time economic output has been used in the formula, and raised the weight of area. It declined to cap cesses and surcharges or bring them into the divisible pool.
Background. Article 280 requires the President to constitute a Finance Commission every five years to recommend how central taxes are shared between the Union and the States (vertical) and among the States (horizontal). Cesses and surcharges are outside the divisible pool under Article 270.
Why CLAT asks: Vertical versus horizontal devolution, and why cesses matter to the States, make a classic federalism question.
Sources: Business Today: Finance Commission introduces new parameter of contribution of State to GDP in horizontal devolution (1 February 2026); Moneylife: 16th Finance Commission retains 41% tax devolution
GDP measured on a new base year: 2022-23
February 2026
In February 2026 the National Statistics Office moved the GDP series to a new base year, 2022-23, replacing 2011-12, and brought in new data sources such as GST records, vehicle registrations on e-Vahan and natural gas consumption. On the new series, real GDP growth for 2025-26 was estimated at 7.6%, up from the earlier 7.4%, with nominal growth of about 8.6%.
Background. Base years are revised so that prices and the structure of the economy reflect current conditions. The NSO sits under the Ministry of Statistics and Programme Implementation.
Why CLAT asks: Why base years change, and nominal versus real growth, are reliable economics questions.
Source: FIPI Policy Economic Report, March 2026
RBI transfers a record ₹2.87 lakh crore surplus to the government
22 May 2026
On 22 May 2026 the RBI's Central Board approved a surplus transfer of ₹2,86,588 crore to the government for 2025-26, the highest ever and about 6.7% more than the year before. Large dollar sales to defend the rupee and higher returns on foreign assets drove its income. The Board also raised the Contingency Risk Buffer sharply, to about ₹1.09 lakh crore; without that, the transfer could have been far larger.
Background. Section 47 of the RBI Act, 1934 requires the RBI to pay its surplus profits to the Union. The Bimal Jalan Committee (2019) set the economic capital framework, with a risk buffer of 5.5 to 6.5% of the balance sheet.
Why CLAT asks: Under which Act and section the RBI pays its surplus, and which committee set the framework, are tested often.
Sources: Finnovate: RBI dividend FY26 explained (26 May 2026); Basis Point Insight: RBI surplus transfer windfall to support liquidity, fiscal math in FY27
RBI raises the repo rate to 5.50%, its first hike since 2023
7 October 2026
On 7 October 2026 the RBI's Monetary Policy Committee, chaired by Governor Sanjay Malhotra, raised the repo rate by 25 basis points to 5.50%, the first increase since February 2023, after holding it at 5.25% in August. It changed its stance from neutral to 'calibrated tightening', with two members preferring neutral. Retail inflation had risen to 4.82% in August on higher crude prices and pressure on the rupee. The RBI projected 2026-27 growth at 7.1% and inflation at 5.2%. The standing deposit facility is now 5.25% and the marginal standing facility 5.75%.
Background. The MPC, under Section 45ZB of the RBI Act, has six members, three from the RBI and three appointed by the government, and must keep CPI inflation at 4% within a band of 2 to 6%. The repo rate is the rate at which the RBI lends to banks against government securities.
Why CLAT asks: Repo, reverse repo, SDF and MSF, and the MPC's composition and target, are the core monetary-policy questions.
Sources: Angel One: RBI increases repo rate to 5.50%, first hike since February 2023; Motilal Oswal: RBI raises rate by 0.25 percent: what it means for the economy (October 2026)
