South Asia Economic Outlook
South Asia’s GDP growth should top the world in 2026, with India—which has been unexpectedly resilient to the Iran energy shock—leading the pack. Smaller regional economies will be slower, with costlier energy intensifying pre-existing headwinds like high interest rates and political instability. Downside risks include El Niño plus a long Iran energy shock.
South Asia Inflation
Inflation cooled to a multi-year low in 2025, as oil and food costs eased. However, in the year to date, regional inflation rates have increased as energy costs soar. Our panelists now project inflation to exceed the prior 10-year average of 5.5% in 2026 owing to the Iran war, and weak harvests owing to El Niño are an upside risk to prices.
This chart displays Economic Growth (Real GDP, ann. var. %) for South Asia from 2010 to 2026.
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| Policy Interest Rate (%, eop) | 4.59 | 7.28 | 7.85 | 7.17 | 6.15 |
| Public Debt (% of GDP) | 79.9 | 79.3 | 80.4 | 79.6 | 79.4 |
| External Debt (% of GDP) | 22.2 | 21.8 | 21.9 | 22.0 | 21.9 |
| Economic Growth (Real GDP, ann. var. %) | 8.9 | 7.2 | 6.4 | 6.5 | 7.0 |
| Fixed Investment (ann. var. %) | 15.1 | 7.9 | 6.1 | 7.2 | 7.7 |
| Inflation (CPI, ann. var. %, aop) | 5.9 | 8.6 | 8.0 | 5.8 | 2.8 |
| International Reserves (USD bn) | 679 | 624 | 686 | 714 | 753 |
| GDP per Capita (USD) | 2,202 | 2,264 | 2,347 | 2,491 | 2,570 |
| Industrial Production (ann. var. %) | 11.3 | 5.8 | 6.2 | 5.5 | 4.2 |
| Fiscal Balance (% of GDP) | -6.4 | -6.6 | -5.8 | -5.0 | -4.3 |
| Merchandise Imports (USD bn) | 763 | 886 | 805 | 857 | 922 |
| Current Account Balance (% of GDP) | -1.2 | -2.5 | -0.9 | -0.6 | -0.5 |
| Merchandise Trade Balance (USD bn) | -260 | -338 | -276 | -328 | -390 |
| Private Consumption (ann. var. %) | 10.9 | 7.3 | 5.3 | 6.3 | 6.7 |
| Merchandise Exports (USD bn) | 502 | 548 | 529 | 529 | 531 |
| Unemployment (% of active population, aop) | 5.9 | 5.2 | 5.1 | 5.2 | 5.2 |