By R Anil Kumar
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India, the largest economy in the South Asia region, is projected to grow by 6.6% in 2025
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The near-term outlook in South Asia is largely favourable, with growth forecast to ease slightly from 5.9% in 2024 to 5.7% in 2025, according to the World Economic Situation and Prospects 2025
United Nations, 11 January 2025.
India to lead expansion in South Asia
South Asia will remain the fastest-growing region, with a predicted 5.7 per cent growth, led by India’s 6.6 per cent expansion, the UN report said.
World Economic Situation and Prospects 2025
India’s economy is set to grow at 6.6% in 2025, maintaining its position as a major driver of global growth at a time when the overall world economy is projected to remain relatively stagnant, according to the United Nations’ flagship (WESP) economic report.
India is poised to retain its position as the world’s fastest-growing large economy, with a projected GDP growth rate of 6.6 per cent in 2025, according to the World Economic Situation and Prospects 2025 (WESP) Report released by the United Nations on Thursday (9 January).
Hamid Rashid, UN head of Global Economic Monitoring, highlighted India’s robust economic trajectory, emphasising, “India would again be the fastest growing large economy in the world.”
Key Projections
The report forecasts India’s economy to grow slightly faster at 6.8 per cent in 2026, following a robust 6.6 per cent growth in 2025.
The sustained growth is attributed to strong private consumption and investments, bolstered by capital expenditure on infrastructure, which is expected to yield significant multiplier effects in the coming years.
Additionally, the report highlights India’s strong export performance, particularly in pharmaceuticals, electronics, and services, as key contributors to economic expansion.
Manufacturing and services sectors are also expected to play a pivotal role in driving growth during the forecast period.
Agricultural and Investment Gains
A favourable monsoon in 2024 has enhanced agricultural output expectations for 2025, with increased summer-sown crop areas.
Investment growth remains robust in South Asia, driven by domestic and foreign investments in supply chains, particularly in India, Indonesia, and Vietnam.
Inflation and Employment Trends
Consumer price inflation is projected to decline from 4.8 per cent in 2024 to 4.3 per cent in 2025, comfortably within the Reserve Bank of India’s target range of 2–6 per cent.
Employment indicators have remained strong, with labour force participation near record highs. Urban unemployment stood at 6.6 per cent in 2024, marginally lower than 6.7 per cent in 2023.
Global and Regional Context
Global economic growth is forecast to remain steady at 2.8 per cent in 2025, with modest improvement to 2.9 per cent in 2026.
However, China’s growth is expected to moderate to 4.8 per cent in 2025 due to a shrinking population and rising trade tensions, threatening its medium-term prospects.
The UN cautions that risks to India’s growth remain, including geopolitical tensions, slowing external demand, and vulnerability to climate hazards.
The projections from the UN came as the first advance estimates project India’s GDP growth for FY25 at 6.4 per cent, still a global standout.
Global economic growth to remain subdued at 2.8% in 2025: United Nations
Global trade is expected to grow by 3.2% in 2025, slightly down from 3.4% in 2024. However, tensions in trade policies and geopolitical uncertainties pose risks
The United Nations has warned that global economic growth will remain subdued in 2025, remaining at 2.8 per cent, the same as 2024. This is due to ongoing uncertainty, according to its latest World Economic Situation and Prospects (WESP) 2025 report, released on Thursday.
The report highlighted that while the global economy has shown resilience against multiple shocks, growth is still below the pre-pandemic average of 3.2 per cent.
Factors influencing global economic growth
Weak investment, slow productivity, and high debt levels are the key factors holding back progress.
The UN notes that lower inflation and easier monetary policies in many countries could provide a small boost to economic activity in 2025. However, risks such as geopolitical conflicts, rising trade tensions, and high borrowing costs continue to create uncertainty.
These challenges are especially severe for low-income and vulnerable countries, where fragile growth hinders progress toward the sustainable development goals (SDGs).
UN Secretary-General Antonio Guterres emphasised the need for collective action, saying, “In our interconnected economy, shocks on one side of the world push up prices on the other. Every country is affected and must be part of the solution. Together, let’s make 2025 the year we put the world on track for a prosperous, sustainable future for all.”
Regional growth highlights
According to the report, growth trends across regions show varying trajectories for 2024 and 2025.
In the United States, growth is projected to slow from 2.8 per cent in 2024 to 1.9 per cent in 2025 due to a weaker labour market and reduced consumer spending.
Europe is expected to see a modest recovery, with growth improving from 0.9 per cent to 1.3 per cent, supported by easing inflation and robust labour markets.
Africa’s growth is expected to rise from 3.4 per cent in 2024 to 3.7 per cent in 2025, supported by recoveries in key economies like Egypt, Nigeria, and South Africa, though challenges such as conflicts and climate issues persist.
Meanwhile, East Asia is expected to grow at 4.7 per cent, driven by China’s steady 4.8 per cent growth and strong private consumption.
Trade and inflation outlook
Global trade is expected to grow by 3.2 per cent in 2025, slightly down from 3.4 per cent in 2024. However, tensions in trade policies and geopolitical uncertainties pose risks.
Inflation is projected to decline from 4 per cent in 2024 to 3.4 per cent in 2025, offering some relief to households and businesses. Central banks are likely to cut interest rates further as inflation eases. However, many developing countries may still face high inflation, with one in five experiencing double-digit rates.
The region’s GDP is anticipated to grow by 5.7% in 2025, fuelled by India’s robust economic performance and recoveries across neighbouring countries.
As the largest economy in South Asia, India is expected to see 6.6% growth this year and 6.8% growth in 2026, driven by strong private consumption and investment.
While lower inflation and anticipated monetary easing across economies could boost global activity in 2025, the report identifies significant challenges ahead. Geopolitical conflicts, escalating trade tensions, and high borrowing costs pose particular risks to low-income and vulnerable countries, potentially hampering progress toward achieving the Sustainable Development Goals (SDGs).
A notable highlight of the report is the emerging opportunity in critical minerals for energy transition. South Asian nations, among other developing countries, stand to benefit from the rising global demand for lithium, cobalt, and rare earth elements.
