India’s economic expansion is expected to moderate in the coming financial year as external pressures weigh on growth, according to the latest report by UNESCAP.
The Economic and Social Survey of Asia and the Pacific 2026 projects India’s GDP growth at 6.4% in FY27, lower than the estimated 7.4% expansion in FY26.
The slowdown is attributed to global uncertainties and disruptions arising from the ongoing West Asia conflict, which are impacting trade, energy supplies, and overall economic conditions.
Looking ahead, growth is expected to recover slightly to 6.6% in FY28, supported by domestic demand and continued strength in the services sector.
These projections are broadly aligned with other estimates. The Reserve Bank of India expects 6.9% growth in FY27, while the Asian Development Bank has also projected 6.9%, and the World Bank estimates 6.6%. India’s GDP is estimated to have grown 7.6% year-on-year in FY26, based on second advance estimates.
Inflation is expected to rise due to energy and commodity price pressures. The report projects inflation to increase from 2.3% in FY26 to 4.4% in FY27, before easing slightly to 4.3% in FY28. Despite this rise, inflation is expected to remain within the RBI’s tolerance band of 2–6%.
The surge in prices is linked to geopolitical developments. Brent crude oil prices increased to the $90–100 range in March 2026 from about $69 earlier, reversing earlier expectations of declining commodity and energy prices. Disruptions to trade routes are also expected to push up costs of food and fertilisers.
Across South and South-West Asia, economic growth improved to 5.4% in 2025 from 5.2% in 2024, largely supported by India’s performance. However, growth in developing Asia-Pacific economies is expected to slow from 4.6% in 2025 to 4.0% in 2026. If geopolitical tensions ease, growth could improve to 4.3% in 2027.
Regional inflation is projected to rise to 4.6% in 2026 before moderating to 3.5% in 2027, assuming partial easing of geopolitical tensions.
India’s strong growth in FY26 was driven by robust domestic demand, particularly in rural areas, along with policy measures such as GST rate cuts. Export activity also increased ahead of tariff hikes imposed by the United States.
However, growth momentum weakened in the latter half of 2025 due to a sharp decline in exports to the US following higher tariffs. Despite this, the services sector continued to act as a key support for the economy.
Foreign direct investment inflows across developing Asia-Pacific economies have been impacted by geopolitical uncertainties. Even so, India has continued to attract strong greenfield investments, securing around $50 billion in the first 3 quarters.
Remittances remain an important source of household income. India, the largest recipient globally, received $137 billion in 2024. However, the introduction of a 1% tax on remittances by the United States from January 2026 may pose some challenges.
The report also highlighted the role of the production-linked incentive scheme in strengthening India’s manufacturing base, particularly in sectors such as solar energy, batteries and green hydrogen.
Read More: India Approves Additional 25 LMT Wheat Exports Amid Strong Supply Outlook!
The outlook suggests a phase of moderated growth for India in FY27, shaped by global uncertainties and energy market disruptions, even as domestic demand and services continue to provide stability to the economy.
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Published on: Apr 22, 2026, 9:16 AM IST
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