India’s economic trajectory is expected to remain one of the strongest among major global economies, even as external headwinds begin to weigh on growth momentum. According to the latest assessment by the United Nations Economic and Social Commission for Asia and the Pacific, India is projected to grow at 6.4% in 2026 and 6.6% in 2027, following a robust 7.4% expansion in 2025.

The report, titled Economic and Social Survey of Asia and the Pacific 2026, underscores that India continues to anchor regional growth in South and South-West Asia. The region expanded by 5.4% in 2025, an improvement over 5.2% in the previous year, largely driven by India’s domestic demand resilience.

At the core of India’s growth story remains strong consumption, particularly from rural markets. Policy measures such as goods and services tax adjustments and frontloaded exports ahead of anticipated US tariffs also supported activity during 2025. However, the momentum was not uniform through the year.

Economic activity moderated in the second half of 2025 as exports to the United States dropped sharply by nearly 25% after Washington imposed steep tariffs of up to 50% in August. This marks a clear inflection point where global trade dynamics began directly impacting India’s external sector. Despite this, the services sector continued to provide stability, reinforcing its role as a structural growth pillar.

Inflation is expected to remain broadly under control, with projections of 4.4% in 2026 and 4.3% in 2027, suggesting that macroeconomic stability is likely to persist even as growth normalises.

Beyond headline growth, the report highlights deeper structural shifts shaping the economic outlook. Foreign direct investment (FDI) flows into developing Asia-Pacific economies declined by 2% in 2025 amid heightened geopolitical uncertainty and trade fragmentation. This contrasts with a 14% increase in global FDI flows, indicating a divergence driven by regional risk perception.

India, however, remains a key destination for greenfield investments, attracting approximately $50 billion in announced projects during the first three quarters of 2025. This places it ahead of several regional peers and reflects sustained investor interest in India’s manufacturing and clean energy ecosystems.

At the same time, remittances an important support for household consumption are entering a more uncertain phase. India, the world’s largest recipient of remittances at $137 billion in 2024, could face incremental pressure following the United States’ decision to impose a 1% tax on outbound remittances starting January 2026. Given that a significant portion of remittance inflows is directed toward essential household spending, any disruption could have second-order effects on consumption patterns.

The report also points to the growing importance of the energy transition as a structural growth lever. Globally, green jobs have reached 16.6 million, with India accounting for around 1.3 million positions. Policy frameworks such as production-linked incentives are helping build domestic manufacturing capabilities in solar modules, batteries, and green hydrogen, reducing import dependence while fostering new industrial ecosystems.

From a policy perspective, the emphasis is clear: targeted public investment and industrial policy can accelerate the development of green sectors, creating long-term economic resilience.