NEW DELHI: India’s economy is estimated to have grown 7.4% in calendar year 2025 and is expected to expand by 6.6% in 2026, supported by resilient consumption and strong public investment that should largely offset the adverse impact of higher US tariffs, according to the World Economic Situation and Prospects 2026 report by the United Nations’ department of economic and social affairs.
Released on Thursday, the report said recent tax reforms and monetary easing are likely to provide additional near-term support to growth. The assessment is based on information available up to 1 December 2025.
The UN’s latest estimate for 2025 marks a sharp upward revision of 1.1 percentage points from its September forecast of 6.3%. The 2026 growth projection has also been raised by 20 basis points to 6.6%, the report showed.
While higher US tariffs may weigh on select product categories, key export segments are expected to remain largely unaffected, the report said. Strong demand from other major markets should also partially offset the impact.
However, risks to the outlook for East and South Asia remain tilted to the downside.
“Trade policy uncertainty is a key near-term risk, even though recent U.S. tariff increases on Asian economies were smaller than initially anticipated and some trade agreements have been reached. A slowdown in major economies—including China, the European Union, and the United States—could further weigh on regional merchandise trade, investment flows, and tourism activity,” the report said.
Official data released on Wednesday showed that India’s economy is likely to expand by 7.4% in the current financial year ending March 2026, driven by strong growth in manufacturing and services, alongside robust investment and consumption.
At the global level, the UN revised its 2025 growth forecast upwards to 2.8% from 2.5% in September. Global growth in 2026 is expected at 2.7%, higher than the earlier estimate of 2.5% but marginally slower than in 2025.
In 2027, global growth is projected to edge up to 2.9%, still below the pre-pandemic average of 3.2% recorded between 2010 and 2019.
While growth in Europe, Japan and the United States is expected to hold broadly steady at a moderate pace, several large developing economies—including China, India and Indonesia—are projected to continue posting solid growth, driven by resilient domestic demand or targeted policy measures, the UN said.
“A combination of economic, geopolitical and technological tensions is reshaping the global landscape, generating new economic uncertainty and social vulnerabilities,” the report quoted UN secretary-general António Guterres as saying.
The UN added that a partial easing of trade tensions has helped limit disruptions to international commerce, but the impact of higher tariffs and elevated macroeconomic uncertainty is expected to become more evident in 2026. The report also flagged stretched corporate valuations, particularly in sectors linked to rapid advances in artificial intelligence.
Morgan Stanley said in a note that domestic demand will anchor India’s growth. “The sustained strength in high-frequency data in the December quarter is encouraging, as it reinstates domestic demand carrying the growth baton for India. The combined impetus from fiscal and monetary policy support, improved purchasing power and labour market outlook is likely to ensure consumption recovery gains more breadth,” the brokerage said.