‘India likely to grow at 6.6% despite challenging global environment’

United Nations: India is projected to grow at 6.6 per cent in 2026, registering an “exceptionally high growth in a challenging global environment”, with resilient private consumption and strong public investment largely offsetting the impact of high US tariffs, the United Nations has said.

The World Economic Situation and Prospects 2026 report released on Thursday by the UN Department of Economic and Social Affairs said that economic growth in India is projected to “moderate” from an estimated 7.4 per cent in 2025 to 6.6 per cent this year. India will remain the world’s fastest major economy, it said.

“Resilient private consumption, strong public investment, recent tax reforms, and lower interest rates are expected to support near-term growth. However, higher US tariffs could weigh on export performance in 2026 if current rates persist, as the US market accounts for about 18 per cent of total exports from India,” the report said.

It added that while tariffs may adversely affect some product categories, key exports such as electronics and smartphones are expected to remain exempt.

“Moreover, strong demand from other major markets, including Europe and the Middle East, is projected to partially offset the impact,” it said, adding that on the supply side, continued expansion in manufacturing and services sectors will remain a key driver of growth throughout the forecast period.

The report stressed that India’s growth will be supported by resilient consumption and strong public investment, which “should largely offset the adverse impact of higher US tariffs”. “Recent tax reforms and monetary easing should provide additional near-term support,” it added.

Ingo Pitterle, Senior Economist and Officer-in-Charge, Global Economic Monitoring Branch, Economic Analysis and Policy Division, UN DESA, told reporters at a briefing here that South Asia will remain the world’s fastest growing region expanding by 5.6 per cent and much of this growth “comes from India where robust domestic demand, easing inflation supported by a strong harvest and continued policy support are driving growth”.

On the macroeconomic situation in India, Pitterle said the agency has “significantly upgraded” its 2025 and 2026 GDP forecast for the country, reflecting an “exceptional combination of factors which have all worked in the direction of stronger growth in India, of a very dynamic economy”.

He pointed to the strong consumer demand, public investment and falling inflation in India, partly due to a very abundant harvest. The Reserve Bank of India (RBI) could also lower interest rates and provide a monetary impulse. “So we had monetary impulse, we had a positive fiscal impulse to investment and we had positive impact on GDP from the agricultural sector on top of all the other strong growth drivers India was having. That’s why we’re seeing exceptionally high growth even in a context of a relatively challenging global environment,” Pitterle said.

Director, Economic Analysis and Policy Division, UN DESA Shantanu Mukherjee added that there has been diversification of India’s export markets to the EU and the Middle East. Reiterating that India’s domestic growth drivers remain “exceptionally strong”, Mukherjee said services exports are among the country’s strongest export segments and have stayed resilient even as merchandise exports were hit by tariffs. He said India could further leverage artificial intelligence by strengthening services exports and using its skilled manpower to develop productivity-enhancing applications.

Consumer price inflation fell more than expected, averaging three per cent in the first nine months amid favourable base effects and lower food prices, and is forecast at 4.1 per cent, close to the central bank’s target. Gross fixed capital formation rose strongly, driven by higher public spending on infrastructure, defence and renewable energy.

Employment indicators remained broadly stable, with unemployment at 5.2 per cent in October 2025. The rupee stabilised in the first half of the year but weakened later due to US growth, trade talks, portfolio outflows and higher US tariffs, though strong domestic growth is expected to support the currency. The report also noted India has strengthened its position in global electronics supply chains.