India Projected to Be the Fastest Growing Large Economy in 2025, Says UN Report
United Nations, Jan 10: India is poised to retain its position as the fastest-growing large economy in the world, with a projected annual growth rate of 6.6 percent for 2025, according to Hamid Rashid, the UN head of Global Economic Monitoring. This forecast was shared during the release of the United Nations’ flagship report, World Economic Situation and Prospects 2025 (WESP), on Thursday.
The report indicates a slight acceleration in India’s economic growth in 2025, with a forecasted GDP expansion of 6.8 percent. India’s robust economic performance is expected to be driven by strong export growth, particularly in services and specific goods categories such as pharmaceuticals and electronics. The report also highlights the role of robust private consumption and investment, which will further bolster the nation’s economic trajectory. Additionally, capital expenditure on infrastructure development is anticipated to yield strong multiplier effects, contributing significantly to growth in the coming year.
On the supply side, the expansion of the manufacturing and services sectors is expected to continue driving the economy, maintaining momentum throughout the forecast period.
India’s agricultural sector also holds promise, as favorable monsoon rains in 2024 are projected to improve summer-sowing areas, leading to higher agricultural output in 2025. This positive outlook for agriculture adds to the overall optimism surrounding India’s economic performance.
While India’s growth projection for this year slightly decreased from the 6.8 percent growth recorded last year, it is important to consider this in the context of sluggish global growth. Despite the marginal drop, India continues to maintain its position as the world’s fastest-growing major economy.
Global Growth Trends
The global growth rate is expected to remain steady at 2.8 percent, with developed economies experiencing a slight slowdown. Growth in developed economies is forecast to drop by 0.1 percent to 1.6 percent compared to the previous year. Among major economies, China, the second fastest-growing economy, is projected to see its growth slow by 0.1 percent to 4.8 percent this year, with further deceleration expected in 2025.
The United States is also experiencing a slowdown, with its economic growth projected at 1.9 percent for this year, a decline from 2.8 percent recorded in 2024.
India’s growth projection of 6.6 percent for 2025 is slightly higher than the National Statistics Office’s forecast of 6.4 percent for the 2024-25 period.
Economic Outlook for South Asia
The UN report presents a mixed economic outlook for South Asia, with varied performance expected across the region. India is expected to continue leading the region’s growth, contributing significantly to the region’s projected growth rate of 5.7 percent in 2025 and 6 percent in 2026. However, some regional economies are anticipated to face challenges.
Pakistan and Sri Lanka are projected to see modest economic expansion, with GDP growth expected at 3.4 percent and 4 percent, respectively, as both countries recover from economic downturns in the 2022-2023 period. However, this recovery is contingent on resolving ongoing debt-related issues in these nations.
Bhutan and Nepal are expected to experience strong growth, with GDP projected to rise by more than 5 percent in 2025. On the other hand, Bangladesh’s growth outlook has been downgraded to 4.2 percent due to political unrest and uncertainty expected to persist through mid-2024.
Despite some positive forecasts, the WESP report cautions that risks to the region’s economic outlook are skewed to the downside. These risks include the potential escalation of geopolitical tensions, a slowdown in external demand, ongoing debt challenges, and the threat of social unrest. Additionally, the region is highly vulnerable to climate-related risks, with extreme weather events posing a significant threat to its economic stability.
Inflation, Employment, and Labor Market Trends in India
The report also addresses inflation and employment trends in India. Consumer price inflation in India is projected to decrease slightly from an estimated 4.8 percent in 2024 to 4.3 percent in 2025, staying within the Reserve Bank of India’s medium-term target range of 2 to 6 percent. The increase in food prices last year, particularly vegetables and cereals, due to adverse weather conditions, led to inflationary spikes in mid-2024. However, inflation is expected to moderate this year.
In terms of employment, the report notes that labor market indicators have remained strong throughout 2024, with labor force participation nearing record highs. The urban unemployment rate was stable at 6.6 percent in the second quarter of 2024, virtually unchanged from 2023. While progress has been made in improving female labor market participation, significant gender gaps remain, highlighting areas for further improvement.
