India’s economy is projected to grow by 6.5% in 2025, supported by strong public spending and continuing monetary easing, the United Nations Conference on Trade and Development (UNCTAD) said on Wednesday.
Despite a slowdown from the estimated 6.9% growth in 2024, India is forecast to be the fastest growing economy.
Globally, economic growth will expand by 2.3% in 2025 – “below the threshold of 2.5% – a marker of a global recessionary phase”, said UNCTAD.
The reduction in policy rate cut is anticipated to support household consumption and encourage private investment in India, according to the report, titled ‘Trade and Development Foresight — 2025 Under Pressure: Uncertainty Reshapes Global Economic Prospects’.
Last week, the Reserve Bank of India’s (RBI) monetary policy committee (MPC) reduced the policy rate by 25 basis points to 6%, following a similar rate cut in February — the first in five years.
Economists expect further rate cuts by the MPC.
However, rising trade policy uncertainty is a concern as new tariffs imposed by the US come into effect, the report highlighted.
“The imposition of escalating rounds of tariffs will have a disproportionately large impact (both directly and indirectly) on developing countries, particularly those that are more integrated into global supply chains,” the report noted.
It also emphasised that South–South economic integration presents opportunities for developing countries in trade and beyond.
China’s gross domestic product (GDP) growth is projected to slow to 4.4% in 2025 from 5% in 2024. The US is also expected to see a deceleration to 1% from 2.8%.
The South Asia region as a whole will grow by 5.6% in 2025, “as declining inflation opens the way for monetary loosening across most of the region”, said the international body.
However, food price volatility will remain a risk, it said.
Public debt continues to rise in many countries, resulting in increased net interest payments.
UNCTAD noted that net interest payments are the highest in developing countries like Brazil, India, Mexico and South Africa.
India is among the five out of 12 countries (in G20 economies) which are expected to reduce its general government net borrowing, alongside Argentina, Australia, Indonesia and the Republic of Korea, the report said.
