India’s economy is projected to expand by 6.4 per cent in 2026 and 6.6 per cent in 2027, a new United Nations (UN) report has said.

The report from United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said that economies in South and South‑West Asia grew 5.4 per cent in 2025, up from 5.2 per cent in 2024, driven largely by India's strong growth of 7.4 per cent in 2025.

The report further stated that robust rural consumption, goods and services tax cuts and export front‑loading ahead of the United States' tariffs supported India's strong growth.

However, the economic activity moderated in the H2 CY2025 after exports to the United States fell 25 per cent following the introduction of 50 per cent tariffs in August 2025. Services remained a key growth driver, THE United Nations said.

Inflation in India is forecast at 4.4 per cent in 2026 and 4.3 per cent in 2027, the report added.

The report noted that FDI inflows to developing Asian and Pacific economies declined amid trade tensions and geopolitical uncertainty, after a 0.6 per cent surge in 2024. FDI to the region has dipped 2 per cent in 2025, even as global flows surged by 14 per cent.

"Within the Asia-Pacific region, the countries that attracted the largest share of greenfield FDI in the first three quarters were India, Australia, the Republic of Korea and Kazakhstan with $50 billion, $30 billion, $25 billion and $21 billion in announced investments, respectively," the report said.

Asian and Pacific workers working overseas increased their personal remittances, cushioned the impact of vulnerable domestic employment conditions and helped sustain household consumption.

About 40 per cent of the remittances are used for essential spending in India and the Philippines, such as medical expenses.

"However, as the world's largest remittance recipient of $137 billion in 2024, India could face a sizeable loss as the United States has levied a 1 per cent tax on all remittances since January 2026," it said.

The report lauded India's production-linked incentive scheme, as a proof of macroeconomic policy fostering green industrial development through incentives for domestic manufacturing of solar photovoltaic, batteries and green hydrogen.

The scheme reduced import dependence and created new industrial beneficiaries with a vested interest in sustaining the transition, the report noted.