India’s economic growth outlook remains largely positive despite rising global trade tensions, according to the latest assessment by the United Nations. Just a day after the Indian government projected a 7.4% growth rate for the economy in the 2025–26 financial year, the UN Department of Economic and Social Affairs (UN DESA) offered a slightly more cautious but still optimistic estimate, pegging India’s growth at 7.2% for the same period.
In its flagship report, World Economic Situation and Prospects 2026, the UN body said that strong domestic demand — driven by consumption and sustained public investment — is expected to absorb much of the shock caused by higher tariffs imposed by the United States. According to the report, these internal strengths will help India maintain momentum even as external pressures mount.
That said, the UN also flagged potential risks. It noted that prolonged tariff measures could begin to weigh on India’s export performance, particularly because nearly 18% of Indian exports are destined for the U.S. market. While the immediate impact may be manageable, continued trade restrictions could create headwinds if they persist over a longer period.
To counter these challenges, the report highlighted the role of domestic policy support. Measures such as tax reforms and a more accommodative monetary policy are expected to provide short-term relief and stimulate economic activity. In addition, India’s growing trade engagement with other regions — including Europe and West Asia — is likely to cushion the blow from reduced access to the U.S. market.
On a calendar-year basis, the UN projects India’s economy to expand by 7.4% in 2025, broadly in line with government estimates. However, the growth trajectory is expected to moderate slightly in subsequent years. For the financial years 2026–27 and 2027–28, India’s growth is forecast at 6.6% and around 6.7–6.8%, respectively. Despite the slowdown, the UN emphasized that these rates still place India among the fastest-growing major economies in the world.
The report underscored that household consumption remains resilient, supported by improving income levels and steady employment trends. Alongside this, robust public investment continues to act as a backbone for economic expansion. Government spending on physical infrastructure, digital connectivity, defence manufacturing, and renewable energy has played a major role in boosting capital formation over the past year.
On the supply side, the UN expects manufacturing and services to remain key engines of growth. The continued expansion of these sectors is likely to sustain output and employment across the forecast period. Importantly, the report pointed out that not all exports are equally vulnerable to U.S. tariffs. High-value segments such as electronics and smartphones are expected to remain exempt, limiting damage to some of India’s most dynamic export categories.
The UN’s analysis also placed India’s performance in a broader global context. In 2025, India recorded strong growth in gross fixed capital formation, reflecting increased investments in infrastructure and strategic sectors. This contrasts with trends in some other major economies. For instance, China experienced a contraction in fixed asset investment during the first three quarters of 2025, largely due to prolonged weakness in its property sector.
Meanwhile, Gulf Cooperation Council (GCC) countries continued to invest heavily in large-scale projects as part of their long-term economic diversification plans. These investments have helped sustain regional demand and provided opportunities for trade and cooperation with countries like India.
Overall, the UN’s assessment suggests that while global uncertainties — particularly trade-related tensions — pose risks, India’s growth story remains fundamentally strong. With solid domestic demand, sustained public investment, and expanding manufacturing and services sectors, the economy appears well-positioned to navigate external shocks and maintain steady growth in the years ahead.
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