Highlights:
- India’s growth is expected to moderate from 7.4 per cent in 2025 to 6.6 per cent in 2026.
- Strong consumer demand and public investment will offset higher US tariffs.
- Services and electronics exports remain resilient despite trade pressures.
- Inflation has eased, creating room for potential interest rate cuts.
- India remains central to South Asia being the world’s fastest-growing region.
India is projected to grow at a strong 6.6 per cent in 2026, maintaining its position as the world’s fastest-growing major economy despite a challenging global environment and higher US tariffs, according to a new United Nations report.
The World Economic Situation and Prospects 2026 report, released Thursday by the UN Department of Economic and Social Affairs (UN DESA), said India’s economic growth is expected to moderate from an estimated 7.4 per cent in 2025. Even so, the report described India’s performance as “exceptionally high” compared with global peers.
According to the UN, resilient private consumption, strong public investment, recent tax reforms, and lower interest rates are expected to support India’s near-term growth. While higher US tariffs could weigh on export performance if current rates persist, the report said their overall impact is likely to be limited.
The US accounts for about 18 per cent of India’s total exports, and tariffs could affect certain product categories. However, key exports such as electronics and smartphones are expected to remain exempt. Additionally, the growing demand from Europe and the Middle East is projected to partially offset any decline in US-bound shipments.
On the supply side, the continued expansion of India’s manufacturing and services sectors is expected to remain a key driver of growth throughout the forecast period. The UN emphasized that domestic drivers of growth are strong enough to counter external headwinds largely.
Ingo Pitterle, Senior Economist and Officer-in-Charge of the Global Economic Monitoring Branch at UN DESA, told reporters that South Asia will remain the world’s fastest-growing region, expanding by 5.6 per cent, with India accounting for most of that growth. He cited robust domestic demand, easing inflation, a strong agricultural harvest, and sustained policy support as major factors.
Pitterle said the UN has “significantly upgraded” its GDP forecasts for India for both 2025 and 2026, pointing to a rare alignment of positive factors. These include strong consumer demand, falling inflation, public investment, and the possibility of further monetary easing by the Reserve Bank of India.
India’s inflation averaged about 3 per cent during the first nine months of the year, helped by lower food prices and favorable base effects. Inflation is forecast at 4.1 per cent, close to the central bank’s midpoint target, providing room for potential interest rate cuts.
Public spending has driven strong growth in gross fixed capital formation, particularly in physical and digital infrastructure, defense, and renewable energy. Employment indicators remained broadly stable in 2025, with unemployment at 5.2 per cent in October, slightly higher than 4.9 per cent in 2024, while labor force participation increased in both rural and urban areas.
The Indian rupee remained stable in the first half of the year but weakened later amid stronger US growth, trade negotiations, portfolio outflows, and higher US tariffs. Still, the UN said India’s strong economic fundamentals should support the currency in the near term.
The report also highlighted India’s growing role in global electronics supply chains and noted that diversification of export markets and a strong services sector—especially in technology and digital services, have enhanced the country’s economic resilience.
