HP Economic Survey 2025-26 Chapter 2

1: Executive Summary & GSDP Outlook (FY 2025-26)

This  provides the critical macroeconomic "Advance Estimates" (AE) for the state's economy, which are vital for understanding the current fiscal year's growth.

• Real GSDP Growth Rate: Himachal Pradesh is estimated to achieve a real growth rate of 8.3 per cent in FY2025-26. This significantly outperforms the national GDP growth projection of 7.4 per cent for the same period.
• Nominal GSDP (At Current Prices): The State's GSDP at current prices for FY2025-26 is estimated at ₹2,53,886 crore. This marks a growth of 10.1 per cent over the previous year's First Revised (FR) estimate of ₹2,30,587 crore.
• Real GSDP (At Constant 2011-12 Prices): In real terms, the GSDP is expected to reach ₹1,56,681 crore in FY2025-26. This is an increase from ₹1,44,656 crore recorded in FY2024-25 (FR).
• Cumulative Post-Pandemic Growth: Since FY2020-21, the State's GSDP has recorded a cumulative growth of nearly 52 per cent.
• Historic Expansion Milestone: The decade between 2010-11 and 2020-21 remains the fastest expansion phase in the State's history, during which the GSDP rose by 167 per cent.
• Comparison with National Economy: The State's 8.3 per cent real growth highlights its superior economic momentum compared to India's 7.4 per cent growth in the current fiscal year.

Sectoral Growth Highlights (AE 2025-26):

• Tertiary (Services) Sector: Remains the primary growth driver with a real growth rate of 8.6 per cent.
• Secondary (Industry) Sector: Estimated to grow by 7.7 per cent, supported by strong performance in construction and utilities.
• Primary (Agriculture) Sector: Showing a strong recovery with 8.4 per cent growth, specifically led by a rebound in crops at 11.9 per cent.

 2: Per Capita Income (PCI) – The Standard of Living (Data Enriched)

Per Capita Income is a critical indicator of the average economic well-being of the residents of Himachal Pradesh. It is calculated by dividing the Net State Domestic Product (NSDP) by the mid-year population of the State.

• Current Estimates (FY 2025-26 Advance Estimates):
  • Value: Estimated at ₹2,83,626.
  • Previous Year: It was ₹2,58,196 in FY 2024-25 (First Revised).
  • Growth Rate: The State’s PCI grew by 9.8 per cent in the current fiscal year.
• Comparative Advantage:
  • Vs. National Average: Himachal’s PCI has consistently remained higher than the All-India figures over the years.
  • All-India Value (FY 2025-26): For comparison, the national PCI is estimated at ₹2,19,575, reflecting Himachal's lead in living standards.
• Long-Term Growth Trends:
  • Historical Base: The PCI of the State rose from ₹87,721 in FY 2011-12.
  • Compound Annual Growth Rate (CAGR): From FY 2011-12 to FY 2025-26, Himachal registered a CAGR of 8.7 per cent.
  • National CAGR: The national PCI CAGR for the same period was slightly higher at 10.0 per cent.
  • Post-Pandemic Surge: Since FY 2020-21, Per Capita Income in the State has increased by approximately 49 per cent, indicating that economic growth has effectively translated into higher average income levels for residents.
• Historical Milestone:
  • The decade between 2010-11 and 2020-21 was the fastest expansion phase for the State, during which Per Capita Income surged by 272 per cent.

Why this matters for Exams:

• The Gap: While Himachal's PCI is significantly higher in absolute terms (₹2,83,626 vs. India's ₹2,19,575), the national growth rate (CAGR 10.0%) is currently slightly faster than the State's (CAGR 8.7%).
• Resilience: The 49% increase since 2020-21 highlights strong recovery despite severe climate-related disruptions like landslides and flash floods.

3: Sectoral Growth Trajectory (Real Terms)

The state economy is classified into three broad sectors: Primary, Secondary, and Tertiary. Their growth is measured in terms of Gross State Value Added (GSVA) at constant (2011-12) prices.

1. Primary Sector (Agriculture & Allied Activities)

This sector remains the backbone of the rural economy, employing 53.98% of the State's population.

• Overall Growth (FY 2025-26 AE): Expected to grow at 8.4%, a significant rebound from 3.1% in FY 2024-25.
• Crops Sub-sector: Estimated to grow by a robust 11.9% (GSVA: ₹8,413 crore).
• Livestock: Anticipated to grow by 6.9% (GSVA: ₹3,235 crore).
• Forestry & Logging: Projected growth of 4.4% (GSVA: ₹6,018 crore).
• Mining & Quarrying: Estimated to grow by 10.1% (GSVA: ₹1,002 crore).
• Fishing: Projected to grow by 7.0% (GSVA: ₹156 crore).

2. Secondary Sector (Industry)

• Overall Growth (FY 2025-26 AE): Estimated to grow at 7.7%, reaching a GSVA of ₹66,324 crore.
• Construction: The fastest-growing sub-sector in industry at 12.6% (GSVA: ₹13,936 crore).
• Electricity, Gas & Water Supply: Projected to grow at 10.1% (GSVA: ₹9,830 crore).
• Manufacturing: Expected to register a growth of 5.7% (GSVA: ₹42,559 crore).

3. Tertiary Sector (Services)

This sector remains the leading driver of the State's economy.

• Overall Growth (FY 2025-26 AE): Estimated at 8.6%, with a total GSVA of ₹62,581 crore.
• Trade, Repair, Hotels & Restaurants: Buoyant growth of 18.9% (GSVA: ₹13,387 crore).
• Financial Services: Projected to grow at 10.3% (GSVA: ₹4,879 crore).
• Real Estate & Professional Services: Estimated growth of 6.5% (GSVA: ₹16,354 crore).
• Other Services: Projected to grow by 7.4% (GSVA: ₹14,098 crore).
• Public Administration: Expected to have a marginal growth of 0.2% (GSVA: ₹7,078 crore).
• Transport, Storage & Communication: Projected growth of 5.9% (GSVA: ₹6,785 crore).

Key Exam Facts & Historical Context

• National Comparison: Himachal's real GSDP growth of 8.3% in FY 2025-26 outperforms India's projected GDP growth of 7.4%.
• Growth Trends: The primary sector has seen a sharp increase from 1.9% (FY 2023-24) to a projected 8.4% (FY 2025-26), largely due to the rebound in the crops sub-sector.
• Structural Note: While the primary sector only contributes about 14.3% to the GSVA (at current prices), it is crucial for improving living standards as it supports over half the population.

4: Sectoral Contribution & Structural Transformation

The State’s economy is experiencing a significant structural shift, moving from an agrarian base toward an industry and service-led framework.

• Tertiary Sector (Services): * Dominant Contributor: This sector has emerged as the largest contributor to the State's economy, accounting for 46.3 per cent of the Gross State Value Added (GSVA) at current prices in FY 2025-26 (AE).
  • Steady Growth: Its share has expanded from 42.0 per cent in FY 2018-19, driven by robust performance in trade, tourism, and allied services.
• Secondary Sector (Industry):
  • Strong Foundation: The secondary sector remains a critical pillar, contributing 39.4 per cent to the GSVA.
  • Relative Moderation: Despite its vital role, its percentage share has shown a gradual decline from 44.9 per cent in FY 2018-19 to the current 39.4 per cent.
• Primary Sector (Agriculture & Allied):
  • Stabilized Contribution: The primary sector, comprising agriculture, horticulture, and allied activities, contributes 14.3 per cent to the GSVA at current prices.
  • Performance Resilience: While its share in the overall economy is the smallest, the sector has remained relatively stable, fluctuating between 13–15 per cent over the last five years.
• Structural Note: * Transition to Modern Economy: Together, the secondary and tertiary sectors now account for 85.7 per cent of the total GSVA.
  • This confirms that Himachal Pradesh has successfully transformed into a modern economy where nearly 86 per cent of value addition is generated outside the primary sector.

Key Value Additions in Absolute Terms (Current Prices):

5: Sector-wise Distribution of Value Added and Employment

The following table details the shares of different sectors in Gross Value Added (GSVA) for FY 2024-25 and their corresponding shares in employment for FY 2023-24 in Himachal Pradesh compared to national averages:

6: Main Issues and Challenges

The Survey identifies seven critical bottlenecks for the state economy:

1. Output-Employment Gap: High dependence on the primary sector for jobs despite its low output share.
2. Service Sector Quality: A slower structural transformation into high-value services like IT and professional services.
3. Climate Vulnerability: Agriculture and the "apple economy" are highly sensitive to climate changes and natural shocks.
4. Uneven Productivity: Manufacturing shows high value-added but limited job creation.
5. GSDP Fluctuations: Challenges in maintaining long-term stable growth due to frequent external and environmental shocks.
6. Declining Industry Share: The secondary sector's share in the economy has fallen from 44.9% (2018-19) to 39.4% (2025-26 AE).
7. Narrowing PCI Advantage: While state PCI is high, the national growth rate (10% CAGR) is slightly outpacing the state's growth (8.7% CAGR).

7: Way Forward & Key Strategies

To address these challenges, the state proposes the following:

• Agricultural Shift: Prioritize "income enhancement" over mere output growth through high-value crops and Farmer Producer Organizations (FPOs).
• Industrial Strengthening: Focus on cluster-based specialization, resilient infrastructure, and demand-aligned skill development.
• Tourism & Services: Create a regulated, high-value tourism framework supported by digital connectivity and workforce formalization.
• Resilience: Integrate climate resilience into every growth strategy due to the state's ecological fragility.