The United Nations projects the Indian economy will grow by 6.6% in 2025, driven by strong private consumption and investment, following a 6.8% growth in 2024. South Asia is forecasted to grow at 5.7% in 2025, bolstered by India's performance and recovery in Bhutan, Nepal, and Sri Lanka. Key factors include robust exports, favorable monsoon conditions, and significant public sector infrastructure investments. Inflation is expected to decrease, and overall economic sentiment remains optimistic despite some challenges.
According to a recent report from the United Nations, the Indian economy is set to grow by an impressive 6.6% in 2025, buoyed by strong private consumption and investment. This positive trend is part of a broader economic outlook for South Asia, which is anticipated to remain robust, primarily driven by India's stellar performance.
The "UN World Economic Situation and Prospects 2025," released on Wednesday, outlines that South Asia's near-term growth is projected at 5.7% in 2025 and 6.0% in 2026. This growth is supported not only by India but also by recovery in economies such as Bhutan, Nepal, and Sri Lanka.
After achieving a remarkable 6.8% growth in 2024, India is forecasted to maintain a similar pace in the following years. The report emphasizes, "The economy of India, the largest in the (South Asia) region, is forecast to expand by 6.6% in 2025, primarily supported by robust private consumption and investment." Additionally, significant investments in infrastructure development are expected to create a strong multiplier effect on growth.
India's economic activity will be further enhanced by robust export growth in sectors like services and pharmaceuticals, with the manufacturing and services sectors continuing to thrive. Favorable monsoon conditions in 2024 have also improved agricultural output expectations, contributing positively to the economy.
Investment growth remains strong in both East Asia and South Asia, fueled by domestic and foreign investments in new supply chains. The report highlights that India, along with Indonesia and Vietnam, is at the forefront of this investment boom.
Public sector initiatives are crucial for India's large-scale infrastructure projects, enhancing both physical and digital connectivity, as well as social infrastructure improvements. This trajectory of strong investment is expected to persist through 2025.
On the inflation front, consumer price inflation in India is projected to decrease from an estimated 4.8% in 2024 to 4.3% in 2025, remaining well within the central bank's target range. While declining energy prices have contributed to this positive trend, some adverse weather conditions have kept prices for essential items elevated.
The report also notes that several developing economies, including India, are experiencing robust investment growth, contrasting with challenges faced by some African nations and Western Asia.
Globally, economic growth is forecasted at 2.8% in 2025 and 2.9% in 2026, reflecting stability in major economies such as China and the United States, alongside strong performances from developing nations, particularly India and Indonesia.
China, while facing gradual economic moderation, is expected to see a growth rate of 4.8% in 2025. The Chinese government is implementing policies to boost domestic demand and address local government debt challenges, which should yield positive effects over time.
The report concludes that while there are risks to the growth outlook, including potential geopolitical tensions and climate-related challenges, the overall sentiment remains optimistic. The labor market in India continues to show resilience, with high participation rates and stable urban unemployment.
Overall, despite facing some challenges, the Indian economy is poised for a promising future, supported by strong growth indicators and a commitment to continued investment and development.
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