UN Projects 7.4% India Growth in 2025, Cites Reforms
Overview
A United Nations report forecasts India's economy to expand by 7.4% in 2025, positioning it among the world's fastest-growing major economies. Strong private consumption, tax reforms, monetary easing, and government infrastructure spending are key drivers. While export growth may face headwinds from new tariffs, resilient domestic demand and international markets are expected to cushion the impact, though global trade policy uncertainty remains a risk.
The United Nations forecasts India's economy will expand by a robust 7.4% in 2025, maintaining its position as a global growth leader. This projection aligns with domestic estimates, according to UN Country Economist Chris Garroway. The outlook, detailed in the World Economic Situation and Prospects 2026 report, anticipates a slight moderation to 6.6% growth in 2026, followed by 6.7% in 2027.
Growth Drivers Identified
The UN report credits India's strong economic momentum to a confluence of factors. Buoyant private consumption is a primary engine, complemented by the front-loading of exports in the preceding year. Critically, domestic policy reforms are playing a significant role. Tax reforms and monetary easing are actively supporting economic activity.
Fixed Capital Formation Boost
Continued government investment in key sectors is also bolstering fixed capital formation. Significant spending on infrastructure, defence modernization, digitalization initiatives, and the expansion of renewable energy projects is contributing to economic expansion. Garroway highlighted these government expenditures as crucial in boosting the country's productive capacity.
Export Headwinds and Resilience
While the growth outlook is positive, the UN report notes potential headwinds for exports. New tariffs are expected to soften export performance in the coming year. However, the report suggests that key export segments will likely remain largely unaffected, with strong demand from other major markets partially offsetting any negative impact. Trade policy uncertainty is flagged as a key near-term risk.
Global Economic Context
The report situates India's growth within a complex global environment. Navigating trade realignments, persistent price pressures, and climate-related shocks demands enhanced global coordination. Rising geopolitical tensions and inward-looking national policies complicate the path toward multilateral solutions.
