- Strong demand in rural regions helped in registering 7.4% growth in 2025
A report by the United Nations projects that India’s economy will continue to expand steadily, with growth estimated at 6.4% in 2026 and 6.6% in 2027. Inflation is expected to stay within a manageable range, estimated at 4.4% in 2026 and 4.3% in 2027.
According to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), South and South-West Asia recorded economic growth of 5.4% in 2025, slightly higher than 5.2% in 2024, largely supported by India’s strong performance.
India registered an impressive 7.4% growth in 2025, driven by strong domestic demand, especially in rural regions. Policy measures such as GST rate reductions and increased exports ahead of tariff hikes by the United States also contributed to this expansion.
However, the pace of growth slowed in the latter half of 2025 after exports to the US declined sharply following the imposition of steep tariffs. Despite this, the services sector remained a major pillar supporting the economy.
The report also highlights a decline in foreign direct investment (FDI) inflows into developing Asia-Pacific nations due to ongoing trade tensions and geopolitical uncertainties. Even so, India continues to attract significant greenfield investments, securing around USD 50 billion in the first three quarters, alongside countries such as Australia, South Korea, and Kazakhstan.
Remittances remain a key support for household consumption across the region. However, India may face some challenges as the US has introduced a 1% tax on remittances starting January 2026. India remains the world’s largest recipient, having received USD 137 billion in 2024.
The report also underscores the growing importance of clean energy. As per estimates by the International Renewable Energy Agency, global green jobs have reached 16.6 million, with India contributing about 1.3 million jobs.
It further notes that initiatives like India’s production-linked incentive (PLI) scheme are boosting manufacturing in key sectors such as solar energy, batteries, and green hydrogen. Across the Asia-Pacific region, targeted industrial policies are accelerating the shift towards sustainable and clean technology-driven growth.