NEW DELHI: India’s unemployment rate is projected to rise marginally to 7.0 per cent in 2026 from 6.9 per cent in 2025, which is the highest among its peers in the Asia-Pacific (APAC) region, according to Moody’s Analytics’ latest Asia-Pacific outlook report.
India is followed by China and New Zealand with a projected unemployment rate of 5.4 per cent in 2026, and the Philippines at 4.7 per cent, the report showed. India’s unemployment rate will remain at 7 per cent in 2027 and 2028 as well, it added.
Additionally, inflation in India is expected to increase to 4.5 per cent in 2026 from 2.2 per cent in 2025, also the highest among its APAC peers, the report showed, adding that the inflation rate will then ease to 4.1 per cent in 2028.
“Conflict in the Middle East has sent commodity prices surging, creating an uncomfortable echo of the inflation and supply shocks that followed the pandemic and Russia’s invasion of Ukraine. US tariff policy remains in flux, with the threat of higher import levies far from gone,” the report said.
Higher energy prices are expected to feed into transportation and production costs in India, contributing to the uptick in inflation, according to the report. It noted that inflationary pressures have already begun to emerge in March, with rising fuel and logistics costs affecting price levels in several economies, including India.
The report stated that if the conflict persists or intensifies, additional risks could arise from potential shortages in chemicals and fertilisers, which may push up food prices. “This would hit the APAC region especially hard, as food accounts for a large share of household consumption and carries significant weight in regional CPI (Consumer Price Index) baskets,” it added.
India’s retail inflation, which had remained subdued for much of 2025, has begun to pick up in recent months, with the CPI rising from a low of around 0.25 per cent in October 2025 to 2.75 per cent in January 2026, and further to 3.4 per cent in March 2026.
The report also highlighted that domestic demand across much of the Asia-Pacific region remains below pre-pandemic trends, which has so far helped keep inflation in check in many economies. However, the recent surge in commodity prices could reverse this trend, even as growth momentum shows signs of slowing, it said.
Economic growth across the APAC region is projected to slow to 3.8 per cent in 2026 from 4.3 per cent in 2025, before easing further to 3.6 per cent in 2027, according to Moody’s baseline estimates.
Moody’s noted that exports had supported growth over the past year, partly due to front-loading ahead of tariff hikes and the global boom in artificial intelligence (AI)-driven demand for electronics. However, this momentum is expected to moderate, with rising tariffs and global volatility weighing on trade, it added.
The report noted that the global AI boom has been a key factor supporting growth across the APAC region, particularly through a surge in demand for electronics and semiconductor-related exports. Moody’s noted that this has helped sustain export momentum despite weakening domestic demand, with the gains initially concentrated in advanced chip producers before spreading to broader manufacturing segments.
However, it cautioned that the AI-driven expansion may be nearing a pause, amid rising prices, hardware shortages, and elevated equity valuations. “Prices across a range of electronics have surged, and isolated shortages in several hardware segments have disrupted consumer markets,” it added.
Source: Business Standard
