The image is used for representational purposes only. , Photo Credit: Getty Images/iStockphoto
India is expected to grow by 7.2% in fiscal year 2025-26, with consumption and public investment expected to “largely offset” the impact of tariffs by the United States, the United Nations Department of Economic and Social Affairs (UNDESA) said in a report.
This 7.2% projection, presented in UNDESA’s World Economic Situation and Prospects 2026 report, is slightly slower than the 7.4% growth projected in the first advance estimate of GDP for 2025-26 released by the Indian government on Wednesday (January 7, 2026).
The report predicted India’s growth to be 7.4% in calendar year 2025. On a fiscal year basis, the report estimates India to grow at 6.6% and 6.8% in 2026-27 and 2027-28, respectively.
“In India, growth is projected at 7.4% for 2025 and 6.6% for 2026 and 6.7% for 2027, supported by resilient consumption and strong public investment, which will largely offset the adverse impact of high United States tariffs,” the report said. “Recent tax reforms and monetary easing should provide additional support in the near term.”
However, the report said, if US tariffs continue, they could start having an impact on the economy going forward.
“However, if current rates continue, higher tariffs from the United States may impact export performance in 2026, as the United States market accounts for about 18% of total exports from India,” it said.
On the other hand, the report said that, while the tariffs may adversely impact some product categories, key exports such as electronics and smartphones are expected to be exempted. Additionally, it said the impact of the tariffs is expected to be partially offset by strong demand from other key markets, including Europe and the Middle East.
“On the supply side, continued expansion in the manufacturing and services sectors will remain the key driver of growth during the forecast period,” the report said.
It said investment trends among developing economies diverged in 2025.
“India recorded strong growth in gross fixed capital formation due to higher public expenditure on physical and digital infrastructure, defense and renewable energy,” the report said. “Gulf Arab Cooperation Council (GCC) countries continue to make large-scale capital investments in line with long-term economic diversification strategies.”
However, in contrast, the report said China saw a contraction in its real estate investment during the first three quarters of 2025, due to ongoing weakness in the property sector.
“The Indian rupee stabilized against the US dollar due to widespread dollar weakness in the first half of the year,” the report said. “However, in the second half, the Indian rupee declined following stronger than expected growth in the United States and ongoing trade talks.”
It said portfolio outflows and higher US tariffs have increased depreciation pressure on the Indian rupee.
“Nonetheless, strong economic performance in India is expected to support the country’s currency in the near term,” the report said.
The report data showed that India’s real effective exchange rate – which assesses the impact of currency changes and inflation differentials on the international competitiveness of the rupee – rose to 100.9 in 2025 compared to 104.7 in 2024.
An increase in the index reflects a decline in competitiveness and vice versa.
published – January 08, 2026 11:20 PM IST
