UN cuts India's 2025 growth forecast to 6.3% amid global tensions

UN WESP report lowers India's growth outlook for 2025 to 6.3 per cent, citing rising trade tensions and policy uncertainty, but notes strength in consumption and investment

The United Nations on Friday lowered its growth projections for India by 30 basis points for the year 2025 to 6.3 per cent, in line with slower growth projected for the global economy due to heightened trade tensions and policy uncertainty.

 

It also reduced its projection for 2026 by 30 basis points to 6.4 per cent. However, the global body noted that despite the projected moderation, India remains one of the fastest-growing large economies, supported by resilient consumption and government spending.

 

The mid-year update from the UN’s World Economic Situation and Prospects (WESP) report for 2025 reflected a cautious picture of global economic prospects amid rising trade tensions and policy uncertainty.

 

The report stated that resilient private consumption and strong public investment, alongside robust services exports, would support economic growth.

 

“While looming United States tariffs weigh on merchandise exports, currently exempt sectors — such as pharmaceuticals, electronics, semiconductors, energy, and copper — could limit the economic impact, though these exemptions may not be permanent,” the report noted.

 

On the global front, the report projected growth to slow to 2.4 per cent in 2025 and 2.5 per cent in 2026 — both lowered by 0.4 percentage points from projections made in January.

 

Emerging economies such as Brazil, Mexico, and South Africa are facing similar downgrades, with declining commodity prices and weakening investment dampening their outlooks.

 

The report said the global economy is in a fragile state, as trade tensions and policy uncertainty continue to rise. It added that a sharp increase in US tariffs could push up production costs, disrupt global supply chains, and increase financial instability.

 

Regarding the job market, the report noted that in India, unemployment remains largely stable amid steady economic conditions, though persistent gender disparities in employment underscore the need for greater inclusivity in workforce participation.

 

Meanwhile, inflation is projected to decline to 4.3 per cent in 2025 from 4.9 per cent in 2024, well within the Reserve Bank of India’s target range. “The RBI, which had kept its policy rate steady at 6.5 per cent since February 2023, began its easing cycle in February 2025,” the report said.