- India is projected to grow at 6.4 per cent in 2026 and 6.6 per cent in 2027
- Exports to US dropped 25 per cent after tariff shock in August 2025
- IMF estimates place India behind the UK again in global GDP rankings
India’s economic momentum is holding up on paper, but the broader picture is beginning to look more complicated. A fresh report from the United Nations ESCAP projects the country’s growth at 6.4 per cent in 2026, rising slightly to 6.6 per cent in 2027.
That sounds steady enough. But alongside this, revised data from the International Monetary Fund suggests India has slipped back to sixth place globally, overtaken again by the UK. The shift comes after changes in statistical assumptions and a weaker rupee, quietly reversing a milestone that had been widely celebrated.
India’s economy expanded by 7.4 per cent in 2025, driven largely by consumption, particularly in rural areas. Tax adjustments under the goods and services regime and a push in exports ahead of US tariffs also helped, “as quoted in a news report.”
But that momentum didn’t fully carry through the year. Economic activity slowed in the latter half of 2025, with exports to US dropping by 25 per cent after Washington imposed 50 per cent tariffs in August 2025.
The services sector continued to carry much of the weight, acting as a stabiliser while other parts of the economy showed signs of strain. Inflation, meanwhile, is expected to stay relatively contained at 4.4 per cent in 2026 and 4.3 per cent in 2027.
Across the wider region, South and South-West Asia grew by 5.4 per cent in 2025, up slightly from 5.2 per cent in 2024, with India doing much of the heavy lifting.
A global ranking reality check
Alongside these growth projections sits a less comfortable update. IMF estimates place India’s GDP at around £3.14 trillion ($3.92 trillion) in 2025 and £3.32 trillion ($4.15 trillion) in 2026.
The UK, however, is projected slightly ahead at roughly £3.20 trillion ($4 trillion) and £3.41 trillion ($4.26 trillion) for the same years. Japan remains further ahead, with output hovering above £3.5 trillion ($4.4 trillion).
This marks a reversal from earlier projections that had suggested India would overtake both economies. Those forecasts have now been revised downward, raising questions about how durable the country’s climb up the global rankings really is.
The timing is awkward. The government had recently highlighted India’s rise to fourth place, a claim that now appears premature.
Trade tensions, remittances and the green shift
Beyond growth and rankings, the report points to a shifting external environment. Foreign direct investment into developing Asia-Pacific economies fell by 2 per cent in 2025, even as global flows rose by 14 per cent.
India still attracted one of the largest shares of greenfield investments, worth about £40 billion ($50 billion), alongside countries like Australia and South Korea.
Remittances continue to support household consumption, especially for essentials like healthcare. But even here, there are emerging risks. India, the world’s largest recipient with £108 billion ($137 billion) in 2024, could see inflows affected after the US introduced a 1 per cent tax on remittances starting January 2026.
At the same time, there is a quieter shift underway. Green jobs are expanding, with India accounting for around 1.3 million roles. Policies such as the production-linked incentive scheme are being positioned as tools to build domestic manufacturing in areas like solar modules, batteries and green hydrogen, “reportedly said” in the assessment.
