India's economy projected to grow at 6.4% this year: UN

United Nations: India's economy is projected to grow at 6.4 per cent this year and 6.6 per cent in 2027, according to a report by the United Nations.

The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said in the report released Monday that economies in South and South-West Asia grew by 5.4% in 2025, compared to 5.2% in 2024, driven largely by strong growth in India.

India's growth edged up to 7.4% in 2025, “supported by robust consumption, especially from the rural economy along with goods and services tax rate cuts, and export frontloading ahead of the United States’ tariffs,” the report, titled Economic and Social Survey of Asia and the Pacific 2026, said.

It said in India, economic activities moderated in the second half of 2025 as exports to the United States declined by 25 per cent following the introduction of 50 per cent tariffs in August 2025. The services sector remained a key growth driver.

The report projected India to register a 6.4 per cent growth rate in 2026 and 6.6 per cent next year. Inflation for the country is projected to be 4.4 per cent this year and 4.3 per cent in 2027.

The report said that FDI inflows to developing Asian and Pacific economies declined amid trade tensions and geopolitical uncertainty. After an increase of 0.6% in 2024, FDI to the region declined by 2% in 2025, even as global flows increased by 14%.

“Within the Asia-Pacific region, the countries that attracted the largest share of greenfield FDI in the first three quarters were India, Australia, the Republic of Korea and Kazakhstan with USD 50 billion, USD 30 billion, USD 25 billion and USD 21 billion in announced investments, respectively,” it said.

It further said that personal remittances, sent by Asian and Pacific workers employed outside of their home countries, continued to rise, cushioning the impact of vulnerable domestic employment conditions.

Remittances have helped sustain the consumption of many households, but are facing headwinds.

In India and the Philippines, about 40 per cent of the transfers are used for essential spending, including medical expenses, of recipient households.

“However, as the world’s largest remittance recipient of USD 137 billion in 2024, India could face a sizeable loss as the United States has levied a 1% tax on all remittances since January 2026,” it said.

The report also cited estimates by the International Renewable Energy Agency (IRENA) that suggested that there were around 16.6 million green jobs globally, with annual job creation of around 0.8 million between 2012 and 2024, 7% annual growth.

Out of these 16.6 million jobs, 7.3 million were in China, 1.3 million in India and 2.5 million in the rest of Asia – 44%, 8% and 15% of the global total, respectively.

“Governments can leverage the energy transition to an environmentally sustainable economy to foster new domestic industries and build supportive constituencies,” it said.

It noted that public investment and targeted industrial policies can accelerate the emergence of beneficiaries such as renewable manufacturers, grid developers, storage providers and green industrial clusters.

The report cited India’s production-linked incentive scheme, saying it illustrates how macroeconomic policy can foster green industrial development through incentives for domestic manufacturing of solar photovoltaic, batteries and green hydrogen, reducing import dependence while creating new industrial beneficiaries with a vested interest in sustaining the transition.

“Across developing economies in Asia and the Pacific, targeted industrial policies are being used to scale clean technology manufacturing and accelerate the energy transition. Initiatives include India’s Production Linked Incentive scheme for high-efficiency solar modules, China’s strategic subsidies for electric vehicle battery manufacturing,” it said.