India’s Economic Growth Seen at 6.6% in 2026 Amid Global Headwinds: United Nations Report

India to Remain Fastest-Growing Major Economy​

India is projected to grow at 6.6 percent in 2026, maintaining its position as the world’s fastest-growing major economy despite a challenging global environment, according to the latest assessment by the United Nations.

The growth forecast reflects a moderation from an estimated 7.4 percent in 2025, but remains strong relative to global peers. The outlook highlights that resilient domestic demand and sustained public investment are expected to largely offset pressures arising from higher US tariffs.

Domestic Demand and Public Investment Drive Momentum​

The report notes that private consumption continues to remain resilient, supported by recent tax reforms and easing monetary conditions. Alongside this, strong public investment in physical and digital infrastructure is expected to provide steady support to economic activity in the near term.

Lower interest rates and recent fiscal measures are also expected to strengthen investment sentiment, helping cushion the economy against external shocks.

US Tariffs to Weigh on Exports, Impact Seen as Manageable​

Higher US tariffs could affect India’s export performance in 2026 if current rates persist, particularly as the US accounts for about 18 percent of India’s total exports. However, the impact is expected to be contained.

The report highlights that key export segments such as electronics and smartphones are likely to remain exempt, while rising demand from Europe and the Middle East is projected to partially offset tariff-related pressures. Continued expansion in the manufacturing and services sectors is expected to remain a core driver of growth through the forecast period.

Services Exports and Market Diversification Offer Support​

India’s export profile has seen greater diversification, with increased engagement across the European Union and the Middle East. Services exports, in particular, have remained resilient even as merchandise exports face tariff-related challenges.

The report underscores the role of India’s skilled workforce and services sector in sustaining export momentum, especially as technology-led applications continue to expand across global markets.

Inflation Moderates, Monetary Conditions Ease​

Consumer price inflation in India eased more than expected, averaging 3 percent in the first nine months of the year, supported by favourable base effects and lower food prices. Inflation is projected at 4.1 percent, close to the central bank’s midpoint target.

Easing inflationary pressures, aided by a strong agricultural harvest, are expected to provide room for further monetary support if required.

Capital Formation, Employment Trends Remain Stable​

India recorded strong growth in gross fixed capital formation, led by higher public spending on infrastructure, defence, digital assets, and renewable energy projects.

Employment indicators remained broadly stable during 2025. The unemployment rate stood at 5.2 percent in October 2025, compared with 4.9 percent in 2024, while labour force participation increased in both rural and urban areas during the second half of the year.

Rupee Stability Supported by Economic Fundamentals​

The Indian rupee remained relatively stable in the first half of the year, aided by broad US dollar weakness. In the latter half, the currency edged lower amid stronger US growth, trade negotiations, portfolio outflows, and tariff-related pressures.

Despite these factors, the report states that India’s robust economic performance is expected to support the rupee in the near term.

Industrial Policies Help Contain Inflation Risks​

India’s industrial and agricultural initiatives aimed at expanding domestic production of edible oils and pulses, modernising fertiliser and storage infrastructure, and improving logistics have reduced dependence on imports. These measures have helped lower exposure to global supply shocks while also supporting rural incomes and food security.

Global Growth Outlook Remains Subdued​

Global economic growth is estimated at 2.8 percent in 2025 and is forecast to ease to 2.7 percent in 2026, before improving marginally to 2.9 percent in 2027. This remains below the pre-pandemic average of 3.2 percent.

While growth in the US, Europe, and Japan is expected to remain steady at a moderate pace, large developing economies including India are projected to continue delivering solid growth, driven by resilient domestic demand and targeted policy support.

The report also notes that India has strengthened its role within global electronics supply chains, even as shifts in global trade patterns reshape export flows across major economies.