UN trims India's 2026 GDP forecast to 6.4%, says better placed than neighbours to weather oil shock

India's economy is expected to grow at 6.4% in 2026, the United Nations has said, trimming its growth forecast by 20 basis points from its January estimate as the fallout from West Asia conflict clouds the global outlook.

In its mid-year update to the World Economic Situation and Prospects report, the UN said India would remain one of the world's fastest-growing major economies, supported by resilient private consumption and robust services exports.

The global body said India's diversified energy sourcing, large refining capacity, ample foreign exchange reserves and fiscal room to cushion fuel prices should help limit the direct impact of higher crude oil prices.

"India's economy is forecast to grow by 6.4 per cent in 2026 ... supported by resilient private consumption and strong services exports," the report said.

The forecast comes as the UN cut its global growth estimate for 2026 to 2.5% from 2.7% projected in January, citing disruptions in energy markets caused by the Middle East conflict.

The report said the crisis had "delivered yet another shock to the global economy", slowing growth, reviving inflation and increasing uncertainty.

A modest recovery to 2.8% is projected in 2027, but the UN warned risks remained tilted to the downside.

The energy shock has constrained supply and pushed up oil prices, freight charges and insurance costs, raising production expenses worldwide and interrupting the global disinflation trend that had been under way since 2023.

Inflation in developed economies is forecast to rise to 2.9% in 2026 from 2.6% in 2025, while developing economies are expected to see a sharper increase to 5.2% from 4.2%, the report said.

The UN report said higher fertiliser prices and supply disruptions could also lift food prices by reducing crop yields.

The direct macroeconomic impact on India is expected to be relatively contained compared with some of its South Asian neighbours.

Countries heavily dependent on energy imports from the Gulf Cooperation Council, such as Pakistan and Sri Lanka, are likely to face a sharper deterioration in their terms of trade, the report said.

Bangladesh and Nepal could also come under pressure from weaker remittance inflows from Gulf economies, where remittances account for a substantial share of gross domestic product.

The report said higher energy prices and rising borrowing costs were likely to strain public finances and debt sustainability across developing economies.

"The Middle East crisis has intensified strains across developing economies," UN Under-Secretary-General for Economic and Social Affairs Li Junhua said.

"Rising borrowing costs and renewed capital-flow pressures risk deepening debt vulnerabilities and constraining the resources available for sustainable development at a critical moment," he said.

The UN warned that the worsening global outlook could reverse development gains, increase poverty and undermine progress toward the Sustainable Development Goals, particularly in low-income countries with limited fiscal space.