India to grow at 7.2% in 2025-26 says UN DESA
Context:
The United Nations Department of Economic and Social Affairs (UN DESA) has released its World Economic Situation and Prospects 2026 report
Key Projections:
India is projected to grow at 7.2% in the fiscal year 2025-26.
This is slightly lower than the Indian government’s estimate of 7.4%
The growth rate is estimated to moderate to 6.6% in 2026-27 and 6.8% in 2027-28
Drivers of Growth:
Growth will be supported by domestic factors like resilient consumption and strong public investment in physical and digital infrastructure, defence, and renewable energy
On supply side continued expansion in the manufacturing and services sectors remains a key driver
India recorded strong growth in Gross Fixed Capital Formation (GFCF).
In contrast, China saw a contraction in fixed asset investment due to weakness in its property sector.
External Factors & Tariffs:
The report warns that tariffs imposed by the US could weigh on the economy, as 18% of Indian exports are US-bound
However, strong demand from other markets like Europe and West Asia, along with expected exemptions for key exports like electronics and smartphones, will limit the impact
Currency & Competitiveness:
The Indian rupee stabilized in the first half of the year but faced depreciation pressure later due to portfolio outflows and US tariffs
India's Real Effective Exchange Rate (REER), which measures international competitiveness, improved to 100.9 in 2025 from 104.7 in 2024.