UN body pegs India’s growth at 7.2% this fiscal, Pg1

Key Highlights:

• The UN DESA projects India's economy to grow at 7.2% in fiscal year 2025-26, slightly below the Union government's estimate of 7.4%.
• Consumption and public investment are expected to mitigate the impact of U.S. tariffs on India's growth.
• India's growth is predicted to be 7.4% in calendar year 2025, and 6.6% and 6.8% in fiscal years 2026-27 and 2027-28, respectively.
• Key exports like electronics and smartphones are expected to remain exempt from tariffs.
• India's real effective exchange rate improved to 100.9 in 2025 from 104.7 in 2024.

Detailed Insights:

• The UN DESA report, "World Economic Situation and Prospects 2026," highlights that strong demand from Europe and West Asia will limit the impact of U.S. tariffs on Indian exports.
• Expansion in the manufacturing and services sectors will be a key driver of India's economic growth throughout the forecast period.
• India has recorded strong growth in gross fixed capital formation, driven by increased public spending on physical and digital infrastructure, defence, and renewable energy.
• The Indian rupee stabilized against the U.S. dollar in the first half of 2025 but edged lower in the second half due to stronger-than-expected growth in the U.S. and ongoing trade negotiations.
• Portfolio outflows and higher U.S. tariffs have added to depreciation pressures on the Indian rupee, but robust economic performance is expected to support the currency in the near term.

Key Concepts Involved:

• Gross Fixed Capital Formation: Investments in fixed assets like land, buildings, machinery, and equipment.
• Real Effective Exchange Rate (REER): Measures a currency's value against a basket of currencies, adjusted for inflation.
• Tariffs: Taxes imposed on imported goods and services.