Context: A day after the Centre estimated the economy to grow at 7.4% in financial year 2025-26, the United Nations Department of Economic and Social Affairs said consumption and public investment can “largely offset” the impact of tariffs imposed by the U.S. and enable India to grow by 7.2% this fiscal.
- However, the report warned that continuing tariffs could weigh on the economy as 18% of Indian exports are U.S.-bound. It said “tax reforms and monetary easing should provide additional near-term support”, adding that strong demand from other markets will limit the tariff impact. The report predicted India’s growth to be 7.4% in calendar year 2025. On a fiscal year basis, it estimated India to grow at 6.6% and 6.8% in 2026-27 and 2027-28, respectively.
- “In India, growth is estimated at 7.4% for 2025 and forecast at 6.6% for 2026 and 6.7% for 2027, supported by resilient consumption and strong public investment, which should largely offset the adverse impact of higher U.S. tariffs,” the report said.
- On the other hand, the report presented in the UN DESA’s World Economic Situation and Prospects 2026, added that, while the tariffs may adversely affect some product categories, key exports are expected to remain exempt.
- “On the supply side, continued expansion in manufacturing and services sectors will remain a key driver of growth throughout the forecast period,” the report said.
- The report noted that investment trends among developing economies diverged in 2025. “India recorded strong growth in gross fixed capital formation, led by higher public spending on physical and digital infrastructure, defence, and renewable energy,” the report said.
- “The Cooperation Council for the Arab States of the Gulf (GCC) countries continued to undertake large-scale capital investments aligned with long-term economic diversification strategies.”
- However, in contrast, the report noted that China saw a contraction in its fixed asset investment through the first three quarters of 2025, due to the ongoing weakness in the property sector.
- “The Indian rupee stabilised against the U.S. dollar in the first half of the year, supported by broad dollar weakness,” the report said. “However, in the second half, the Indian rupee edged lower following stronger-than-expected growth in the U.S. and ongoing trade negotiations.” It added that portfolio outflows and higher U.S. tariffs added to depreciation pressures on the Indian rupee.
Source: The Hindu