India's Economic Growth Forecast: 6.4% in 2026 and 6.6% in 2027
Economic Growth Projections for India
According to a recent report from the United Nations, India's economy is expected to expand by 6.4% this year and reach 6.6% in 2027. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) released this report on Monday, highlighting that the economies in South and South-West Asia are projected to grow by 5.4% in 2025, an increase from 5.2% in 2024, largely driven by India's strong performance.
India's growth rate is anticipated to rise to 7.4% in 2025, fueled by robust consumption patterns, particularly in rural areas, alongside reductions in goods and services tax rates and proactive export strategies ahead of U.S. tariffs. However, the report notes that economic activities in India may slow down in the latter half of 2025 due to a 25% drop in exports to the U.S. following the implementation of 50% tariffs in August 2025.
The services sector is identified as a crucial contributor to this growth. The report forecasts a growth rate of 6.4% for India in 2026, followed by 6.6% in the subsequent year. Inflation is projected to be 4.4% this year and slightly lower at 4.3% in 2027.
Furthermore, the report indicates a decline in foreign direct investment (FDI) inflows to developing economies in Asia and the Pacific, attributed to ongoing trade tensions and geopolitical uncertainties. After a modest increase of 0.6% in 2024, FDI in the region fell by 2% in 2025, despite a global increase of 14%.
India, along with Australia, the Republic of Korea, and Kazakhstan, attracted significant greenfield FDI, with announced investments of USD 50 billion, USD 30 billion, USD 25 billion, and USD 21 billion, respectively, during the first three quarters.
Personal remittances from Asian and Pacific workers abroad have continued to rise, providing essential support to households facing challenging domestic employment conditions. In India and the Philippines, approximately 40% of these remittances are allocated for essential expenses, including healthcare. However, India, being the largest remittance recipient with USD 137 billion in 2024, may experience a significant impact due to a 1% tax on all remittances imposed by the U.S. starting January 2026.
The report also references estimates from the International Renewable Energy Agency (IRENA), which indicate that there are around 16.6 million green jobs globally, with an annual creation rate of approximately 0.8 million from 2012 to 2024, reflecting a 7% growth rate. Of these jobs, 7.3 million are in China, 1.3 million in India, and 2.5 million across the rest of Asia, representing 44%, 8%, and 15% of the global total, respectively.
Governments are encouraged to utilize the energy transition towards a sustainable economy to foster new domestic industries and build supportive communities. The report emphasizes that public investment and targeted industrial policies can expedite the development of sectors such as renewable energy manufacturing, grid development, and green industrial clusters.
India's production-linked incentive scheme is highlighted as a model for how macroeconomic policies can promote green industrial growth by incentivizing domestic production of solar panels, batteries, and green hydrogen, thereby reducing reliance on imports while creating new industrial stakeholders committed to the transition.
Across developing nations in Asia and the Pacific, targeted industrial strategies are being employed to enhance clean technology manufacturing and accelerate the energy transition, including India's initiatives for high-efficiency solar modules and China's subsidies for electric vehicle battery production.