India is projected to grow by 7.2% in financial year 2025-26, supported by resilient consumption, public investment and recent policy support. The estimate, placed in the UNDESA World Economic Situation and Prospects 2026 report, is slightly below the government’s first advance estimate of 7.4% for the same year. The report also flags that higher United States tariffs may affect exports if they continue, though strong domestic demand and investment are expected to cushion the impact.
Growth Outlook for India
The report estimates India’s growth at 7.4% in calendar year 2025. It then projects growth at 6.6% in 2026-27 and 6.8% in 2027-28 on a fiscal year basis. The outlook is supported by:
- Resilient private consumption.
- Strong public investment.
- Tax reforms and monetary easing.
- Expansion in manufacturing and services.
Impact of United States Tariffs
The report says higher United States tariffs could weigh on export performance if current rates persist. The United States accounts for about 18% of India’s total exports. However, key export items such as electronics and smartphones are expected to remain exempt. Demand from Europe and the Middle East may also partly offset the tariff impact.
Investment and Currency Trends
India recorded strong growth in gross fixed capital formation in 2025. This was driven by public spending on physical and digital infrastructure, defence and renewable energy. The report also notes that the Indian rupee stabilised in the first half of the year before weakening later due to trade tensions, portfolio outflows and stronger United States growth. India’s real effective exchange rate improved to 100.9 in 2025 from 104.7 in 2024, indicating better competitiveness.
Broader Global Comparison
The report marks diverging investment trends among major developing economies. India and GCC countries saw strong capital investment, while China faced contraction in fixed asset investment because of weakness in its property sector.
Last Modified: April 25, 2026