UN cuts India's 2025 growth outlook to 6.3% from 6.6%

Economic Times

16-05-2025

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New Delhi: The United Nations Department of Economic and Social Affairs (UNDESA) has downgraded India's growth forecast for 2025 to 6.3%, from 6.6% projected earlier, attributing it to trade tensions and policy uncertainty.Despite the downgrade, India will remain one of the world's fastest-growing large economies, supported by strong domestic consumption and government spending, according to UNDESA's 'World Economic Situation and Prospects 2025 mid-year update'. "Resilient private consumption and strong public investment, alongside robust services exports, will support economic growth," it said.Looking ahead to 2026, UNDESA forecast India's gross domestic product (GDP) growth to recover a tad to 6.4%. Optimism in financial markets, solid gains in stock indices, pick up in manufacturing activity, and increase in exports show that "India's economy is not only holding firm but also making headway in an uncertain global environment", the government said on Friday.Manufacturing sector's share in India's economic growth remained steady in the last decade, moving to 17.3% in FY24 from 17.2% in FY14. "This steady growth highlights the sector's increasing role in India's economic landscape," the government noted.On April 2, the US imposed a reciprocal tariff of 26% on imports from India. Key sectors such as pharmaceuticals, electronics, semiconductors, and energy were exempted from the duty. President Donald Trump later announced a 90-day pause on the tariff implementation until July 9, although a baseline tariff of 10% remains in place.While the exemptions may soften the economic impact on India, the report noted that these may not be permanent.Overall, India's exports increased to $824.9 billion in FY25, an increase of 6.01% from $778.1 billion in FY24."Exports, especially in strategic areas like defence production, are expanding steadily," said the government on Friday.Defence exports surged to ₹23,622 crore in FY25 from ₹686 crore in FY14. "The tariff shock risks hitting vulnerable developing countries hard, slowing growth, slashing export revenues, and compounding debt challenges, especially as these economies are already struggling to make the investments needed for long-term, sustainable development," said Li Junhua, United Nations Under-Secretary-General for Economic and Social Affairs.Economic growth in the US will decelerate to 1.6% in 2025 from 2.8% in 2024- below the previous forecast of 1.9%--as higher tariffs and policy uncertainty are expected to dampen private investment and consumption, as per the report.China's growth is also expected to slow to 4.6% from an earlier estimate of 4.8%, due to weaker consumer sentiment, disruptions in export-focused manufacturing and ongoing issues in the property sector, it added.Globally, GDP growth is anticipated to fall to 2.4% in 2025 from 2.8%."Slower global growth, elevated inflationary pressures and weakening global trade including a projected halving of trade growth jeopardise progress toward the Sustainable Development Goals," said UNDESA.