India’s economy is expected to grow by 6.6% in 2025, driven by strong private spending and investment, according to the latest report from the United Nations titled World Economic Situation and Prospects (WESP). The report highlights that pressure on the Indian rupee is likely to reduce in the coming months.
The Indian rupee has been under strain due to a stronger US dollar, recently hitting a record low of 85.93 against the dollar. This depreciation has impacted the country’s foreign exchange reserves, which fell to $640.28 billion in December — the lowest in eight months.
However, the report offers some relief for South Asian currencies, including the rupee. It suggests that the US easing its monetary policy has made investments in the region more appealing, which could help reduce currency pressure. Both direct investments and portfolio inflows are expected to grow, creating a positive outlook for India’s economy in the near future.
The report also noted that inflation in South Asia is easing, giving central banks in the region some breathing room. Many of these banks have either paused interest rate hikes or continued lowering policy rates throughout 2024, providing support for economic growth.
The Reserve Bank of India (RBI) has maintained its policy rate at 6.5% since February 2023 due to ongoing inflation concerns. Meanwhile, central banks in Pakistan and Sri Lanka have reduced their key rates to help boost their economies. On the other hand, Bangladesh has continued raising interest rates to tackle rising inflation, which has been fueled by challenges like weaker crop production, supply chain issues, and a depreciating currency.
Infrastructure Investments Boosting India’s Growth
The UN report highlighted that India’s increased spending on infrastructure is creating a positive ripple effect on the country’s economic growth. Investments in roads, railways, and other key projects are expected to significantly boost economic activity in the coming years.
The report also pointed out that India’s strong export performance, particularly in sectors like pharmaceuticals and electronics, will continue to support the economy.
The manufacturing and services sectors are expected to remain the main engines driving India’s economic growth in the coming years. Additionally, favorable monsoon rains in 2024 have improved crop conditions, raising expectations for a better agricultural output in 2025,” the report stated.
Gender Gap in India’s Workforce Still a Concern
While there has been progress in increasing women’s participation in the workforce, India continues to face significant gender gaps, according to the UN report.
Labour market conditions remained steady in the second quarter of 2024, with urban unemployment recorded at 6.6%, slightly lower than the 6.7% rate in 2023. However, the report emphasized that despite these stable figures, gender inequality remains a pressing issue in India’s labour market, highlighting the need for more inclusive policies to close the gap.
India’s Untapped Potential in Critical Minerals
The UN report highlighted that India holds large reserves of critical minerals that remain largely unexplored. It pointed out that several countries, including Brazil, Vietnam, Tanzania, Mexico, and India, have significant deposits of key minerals like rare earth elements, copper, nickel, graphite, and bauxite.
However, despite these reserves, these countries contribute only a small portion to the global supply of critical minerals. The report emphasized that economies reliant on mining are well-positioned to capitalize on these valuable resources to strengthen their growth and global standing.
