India remains the key growth engine, with an anticipated GDP growth of 6.6 per cent in 2025. The country’s robust services sector, resilient private consumption, and ongoing infrastructure investments are expected to sustain its upward trajectory.
Global economic growth is projected to remain at 2.8 per cent in 2025, unchanged from the previous year, according to the United Nations’ flagship report, World Economic Situation and Prospects (WESP) 2025, released last week. While global growth lags behind pre-pandemic levels, the report highlights South Asia as a standout region with robust economic prospects despite lingering global uncertainties.
The report, released by the UN Department of Economic and Social Affairs (DESA), projects South Asia’s regional GDP growth at 5.7 per cent in 2025, slightly lower than the 5.9 per cent forecasted for 2024. This performance is driven by strong economic activity in India, alongside recoveries in Pakistan, Bhutan, Nepal, and Sri Lanka.
“South Asia’s economic outlook remains robust, with regional GDP anticipated to grow by 5.7 per cent in 2025, compared to 5.9 per cent in 2024, supported by strong performance in India and recovery in Pakistan, Bhutan, Nepal and Sri Lanka,” the report produced by DESA said.
However, it warned that risks to the outlook are tilted to the downside owing to deceleration in external demand, ongoing debt challenges, and social un-rests.
India remains the key growth engine, with an anticipated GDP growth of 6.6 per cent in 2025. The country’s robust services sector, resilient private consumption, and ongoing infrastructure investments are expected to sustain its upward trajectory. Meanwhile, Pakistan and Sri Lanka, both of which have faced significant economic and debt challenges, are poised for moderate recovery once their financial crises are resolved. Bhutan and Nepal also show signs of economic stabilization, supported by improvements in trade and tourism.
Hamid Rashid, Chief of the Global Economic Monitoring Branch at DESA, underscored the importance of addressing debt issues in Pakistan and Sri Lanka. “Once these challenges are resolved, their economies have significant potential for growth,” he stated.
Challenges and Risks
Despite its robust outlook, South Asia faces several downside risks. The report highlights deceleration in external demand, geopolitical tensions, and trade disputes as potential threats to growth. Additionally, climate change poses severe risks, with the potential to exacerbate inflationary pressures and threaten food security across the region.
Persistent food inflation remains a critical concern, affecting nearly half of developing countries globally. For South Asia, this issue is compounded by extreme weather events and vulnerabilities in agricultural supply chains. The report warns that sustained food inflation could push millions further into poverty, undermining progress towards achieving Sustainable Development Goals (SDGs).
“Looming risks ahead East and South Asia face mounting downside risks that could dampen economic prospects. Key risks and challenges include escalating geopolitical tensions, trade disputes, and the impact of climate change, which could reignite inflationary pressures and pose severe risks to food security.”
Global Economic Context
The global economic landscape continues to grapple with stagnation, with growth remaining below the pre-pandemic average of 3.2 per cent. Weak investment, sluggish productivity, and high debt levels have constrained recovery, while geopolitical conflicts and trade tensions exacerbate uncertainties.
Despite these challenges, the report projects a modest boost to global activity in 2025 due to easing inflation and monetary policy adjustments in major economies. Inflation is expected to decline to 3.4 per cent globally, providing some relief to businesses and households. However, many developing nations, including those in South Asia, will continue to face double-digit inflation rates and high debt-servicing burdens, limiting their fiscal space for development investments.
Trade and Services: A Bright Spot
Global trade is forecast to expand by 3.2 per cent in 2025, driven by strong exports from Asia and a rebound in services trade. South Asia’s export performance, particularly in services and select manufactured goods, is expected to bolster regional growth. The report emphasizes the importance of maintaining competitive export industries to sustain economic momentum.
Critical Minerals: Opportunities and Risks
The report’s thematic focus on critical minerals highlights the dual opportunities and challenges for developing countries. Minerals such as lithium, cobalt, and rare earth elements are crucial for the global energy transition, offering significant potential for resource-rich countries to generate revenue, create jobs, and accelerate sustainable development.
For South Asia, the exploitation of critical minerals could provide an avenue for economic diversification. However, the report warns of associated risks, including poor governance, environmental degradation, and unsafe labor practices. DESA Chief Li Junhua emphasized the need for comprehensive policies to ensure sustainable extraction and equitable benefit-sharing.
“Critical minerals have immense potential to accelerate sustainable development, but only if managed responsibly,” Li stated. Governments are urged to adopt forward-looking strategies that prioritize environmental sustainability and socio-economic equity.
Policy Recommendations for Sustainable Growth
To sustain growth and address underlying vulnerabilities, the report calls for bold multilateral action and prudent policymaking. Key recommendations include:
- Debt Resolution: For countries like Pakistan and Sri Lanka, resolving debt crises is paramount to unlocking growth potential. International financial institutions must play a proactive role in restructuring debt and providing concessional financing.
- Investment in Clean Energy and Infrastructure: Governments should leverage fiscal space created by monetary easing to prioritize investments in renewable energy, infrastructure, and critical social sectors such as health and education.
- Climate Resilience: With climate change posing significant risks to food security and livelihoods, the report underscores the need for adaptive measures. Strengthening agricultural supply chains, promoting sustainable farming practices, and investing in disaster-resilient infrastructure are crucial for mitigating climate-related challenges.
- Strengthening Regional Cooperation: Enhanced cooperation among South Asian nations can help address shared challenges such as trade barriers, energy security, and climate resilience. Regional trade agreements and collaborative infrastructure projects can foster economic integration and shared prosperity.
- Harnessing Critical Minerals Responsibly: Policymakers must establish robust regulatory frameworks to manage the extraction and trade of critical minerals. This includes implementing sustainability standards, ensuring fair labour practices, and promoting value addition within domestic economies.
Global Call to Action
UN Secretary-General Antonio Guterres, in his foreword to the report, emphasized the interconnected nature of global challenges and the need for collective action. “In our interconnected economy, shocks on one side of the world push up prices on the other. Every country is affected and must be part of the solution,” he stated.
Guterres called for decisive measures to tackle debt, inequality, and climate change, urging countries to build on progress made and deliver sustainable solutions. “Together, let’s make 2025 the year we put the world on track for a prosperous, sustainable future for all,” he added.
South Asia’s economic resilience offers a beacon of hope in an otherwise subdued global environment. With prudent policies and enhanced regional cooperation, the region can navigate its challenges and capitalize on emerging opportunities.
However, addressing underlying vulnerabilities, from debt crises to climate risks, remains critical to ensuring inclusive and sustainable growth. The WESP 2025 report serves as a clarion call for governments and international stakeholders to adopt bold and coordinated actions to tackle pressing global and regional challenges.
As South Asia strides forward, its success will hinge on balancing economic dynamism with sustainable development imperatives, offering lessons and inspiration for the broader global community.
