As per the report released by the UN Department of Economic and Social Affairs (UN DESA) on Tuesday, India, however, remains one of the fastest-growing major economies.
West Asia crisis has delivered yet another shock to the global economy, slowing growth, reigniting inflationary pressures and heightening uncertainty, it said.
Ingo Pitterle, Senior Economist and Officer-in-charge of Global Economic Monitoring Branch, Economic Analysis and Policy Division, UN DESA, said India is “not immune” to current global challenges.
“It is a large energy importer and it is also exposed to other channels, for example, remittances, add to some vulnerability. Also, a global financial tightening will make monetary policy more complicated,” he added.
Pitterle pointed out that the West Asia “shock” for all countries is having a dual impact on growth – it is lowering growth while at the same time pushing up inflation, and in doing so it is constraining the policy space. “This will also be the case for India. So, the question then remains, how will the central bank and also the fiscal authorities respond to that?…”.
The report, however, noted that India remains one of the fastest-growing major economies, with output still expected to expand by 6.4 per cent, though the step-down from 7.5 per cent in 2025 “underscores the drag from higher energy import costs and tighter financial conditions.” “We have seen structurally very robust growth in India, which has been driven by consumer demand, by public investment, but also by strong performance in services exports. These main drivers will largely remain intact, so India will clearly remain one of the fastest growing economies in the world,” Pitterle said in response to a question by PTI.
The report projects that the country could grow at 6.6 per cent in 2027.
Responding to a question on India’s growth forecast, Shantanu Mukherjee, Director of Economic Analysis and Policy Division, UN DESA said that for many countries that rely on exports, it is important to keep in mind that when import costs go up, exports could also suffer.
“This is a longer term structural issue that you may begin to see play out when things like freight costs, logistics costs, industrial petrochemicals… like diesel fuel start increasing the cost for businesses,” he said.
“Having said that, like many other large economies, India has some space to manage these, which is why I think we’ve been saying all along that a lot depends on whether you can manage these shocks within existing buffers before your inventories, fiscal space run out. That’s crucial,” Mukherjee said.
Global GDP growth is now forecast at 2.5 per cent in 2026-0.2 percentage points below the January projection and well below pre-pandemic norms, the report said.