Moody’s Analytics Downgrades India’s 2025 GDP Forecast Amid US Tariff Threats

While the agency acknowledged the temporary 90-day freeze on most tariffs announced recently, with a 10 per cent blanket tariff substituted in the interim, Moody’s remains cautious

In light of easing inflation, Moody’s Analytics anticipates that the Reserve Bank of India (RBI) will likely reduce interest rates by 25 basis points

Source : ABPLIVE AI

Moody’s Analytics has revised its GDP growth forecast for India in 2025, lowering it by 30 basis points to 6.1 per cent, citing concerns over the potential impact of US tariffs on key sectors such as gems and jewellery, medical devices, and textiles. The credit rating agency noted that the United States is one of India’s largest trading partners, and the imposition of a 26 per cent tariff on Indian imports could severely disrupt the trade balance. “The US is one of India's largest trading partners, so a 26 per cent tariff hovering over imports of Indian goods will heavily impede the trade balance,” Moody’s Analytics stated.

While the agency acknowledged the temporary 90-day freeze on most tariffs announced recently, with a 10 per cent blanket tariff substituted in the interim, Moody’s remains cautious. The revised forecast assumes that the full tariffs may be implemented in the future, which could have a negative impact on India’s economy.

India's Economic Growth

However, Moody’s also pointed out that India’s overall economic growth is expected to remain relatively insulated from these external shocks, as external demand constitutes a smaller portion of the country’s GDP compared to other economies.

In light of easing inflation, Moody’s Analytics anticipates that the Reserve Bank of India (RBI) will likely reduce interest rates by 25 basis points, bringing the policy rate down to 5.75 per cent by the end of 2025. This, combined with earlier tax incentives, is expected to support domestic economic activity and help mitigate the potential adverse effects of the tariffs.

Despite this, Moody’s highlighted ongoing uncertainty in the financial markets, marked by volatility in equity markets. “Households will not want to spend more when the environment is so uncertain, regardless of stronger purchasing power, and businesses will hold back on additional investment as they navigate chaos,” the agency said.