<div id="readability-page-1" class="page"><div id="parent_top_div">India’s economic growth forecast for 2026 has been downgraded to 6.4 per cent by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), with the latest report on Tuesday flagging rising external risks to the outlook. India’s gross domestic product (GDP) growth is projected at 6.4 per cent in 2026, lower than the 6.6 per cent forecast in the 2025 edition, while growth is estimated at 7.4 per cent in 2025 and 6.6 per cent in 2027, according to the report titled Economic and Social Survey of Asia and the Pacific 2026 (ESCAP). The downgrade comes against the backdrop of heightened geopolitical tensions, particularly the ongoing conflict in West Asia, which the report said could trigger higher commodity prices, increased freight costs, and supply chain disruptions. These developments are expected to push up inflation and interest rates, while weakening global demand for goods and services, affecting exports, remittances, and tourism flows. The report projected India’s inflation at 4.4 per cent in 2026, higher than the 4 per cent forecast for 2026 in the 2025 edition, indicating an upward revision in price pressures. It also recorded India’s inflation at 2.3 per cent in 2025 and pegged it at 4.3 per cent in 2027. The report noted that such global shocks could also impact employment and investment sentiment, with job losses and weaker business confidence weighing on consumption and growth. It identified further escalation of the Middle East conflict, renewed global trade tensions, and financial market volatility linked to the technology sector as three key downside risks to the outlook. “India’s economic activities moderated in the second half of 2025 as exports to the United States declined by 25 per cent following the introduction of 50 per cent tariffs in August 2025. The services sector remained a key growth driver,” the report said. Equity markets and currencies in India have come under pressure since the onset of the conflict, with stock indices falling by 5–16 per cent and the rupee depreciating by up to 1.5 per cent against the US dollar amid heightened global uncertainty, the report showed. Beyond external risks, the report highlighted structural labour market challenges across the region. It stated that manufacturing employment remains below pre-pandemic levels across many economies in Asia and the Pacific, even as services jobs have risen. “In many economies, manufacturing employment has not yet recovered from pre-pandemic levels, while that in information services has surged. Similarly, the youth unemployment rate stayed above the overall rate. The impact of the increase in trade protectionism and the recent conflict in the Middle East will disproportionately hurt female workers, who are the backbone of labour-intensive, export-oriented industries, as well as informal workers, who have limited access to social protection,” the report said. The report recommended economies such as India strengthen domestic demand and productivity, with a focus on improving employment, skilling, and job quality, while expanding social protection for vulnerable groups. It also called for better digital and infrastructure connectivity, easier access to finance, and careful policy calibration during the energy transition to balance growth with inflation and fiscal risks. It highlighted India’s production-linked incentive (PLI) schemes as a key policy tool to scale up domestic manufacturing in sectors such as solar modules, batteries, and green hydrogen, supporting industrial growth alongside the energy transition. For the broader region, ESCAP projected that economic growth across developing Asia-Pacific economies will slow to 4 per cent in 2026, down from 4.6 per cent in 2025 and 4.8 per cent in 2024, with only a modest recovery expected thereafter. </div></div>

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India's economic growth forecast for FY26 has been downgraded to 6.4% by the UN's ESCAP, citing rising external risks. The report highlights geopolitical tensions, particularly in West Asia, which may lead to higher commodity prices and inflation. Projected inflation for India in 2026 is now 4.4%, up from 4%. The report warns of potential job losses and weakened business confidence due to global shocks. It recommends strengthening domestic demand and productivity, while also emphasizing the importance of social protection for vulnerable groups.

UN cuts India's FY26 growth forecast to 6.4%, flags external risks