Amidst global tariff tensions, this presents a significant and concerning economic indicator for India. Moody's, the international credit rating agency, has lowered its projection for India's GDP growth rate in 2025 from 6.4% to 6.1%.
Moody's Cuts India GDP Growth: International trade tensions are now impacting India's economic health. Moody's Analytics, a renowned rating agency, has reduced its forecast for India's GDP growth rate for fiscal year 2025 from 6.4% to 6.1%. A primary reason is the potential 26% tariff plan by the US, which could directly affect key Indian export sectors.
Setback from the US, Crisis on Trade Balance
Moody's latest report, 'APC Outlook: US vs Them,' states that the US is India's most important trading partner. Therefore, if the US imposes heavy tariffs on goods imported from India, the impact will be most significant on export sectors such as jewelry, medical devices, textiles, and gaming products.
Tariffs could lead to a decline in Indian exports, increasing the risk of a widening trade deficit. Although the US has currently granted a 90-day grace period, this is a worrying sign for India amidst these trade tensions.
Domestic Demand to Offer Relief?
The report also mentions that India's domestic demand remains b, suggesting that the impact of tariffs on GDP may not be complete. External demand constitutes a relatively small portion of India's overall GDP, offering some support to growth. Moody's also anticipates that the Reserve Bank of India may cut the repo rate by 0.25% this year, bringing it down to 5.75%, considering the declining inflation rate. This cut would make credit cheaper and could boost consumer demand.
New tax incentives and concessions announced by the government could help strengthen the domestic economy. Moody's believes these measures could place India in a better position compared to other nations grappling with global economic stress.
