Moody’s Analytics has revised India’s gross domestic product (GDP) growth projection for 2025, reducing it by 30 basis points (bps) to 6.1% from its baseline forecast in March. It attributed this downgrade in growth to the ongoing tariff threats from the US.
“Although US President Donald Trump has just declared a 90-day freeze on most of the harsh tariffs announced a week ago and applied a 10% blanket tariff in their place, the April baseline represents the economic toll they will have should they eventually go ahead in full,” Moody’s Analytics said.
“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,” it added. Moody’s also highlighted that gems and jewellery, medical devices and textile industries will be among the worst hit sectors from Trump’s tariff threats.
However, it expects overall growth to be relatively insulated from the shock since external demand makes up a relatively small portion of GDP. Since the headline inflation is softening, Moody’s anticipates the Reserve Bank of India to cute repo rate further by 25 bps to 5.75% by end of 2025.
“This, paired with tax incentives announced earlier this year, should help boost the domestic economy and dampen the shock of the tariffs on overall growth relative to other vulnerable economies,” it noted in the ‘APAC Outlook: U.S. Versus Them’ report.
Moody’s Analytics said uncertainty is palpable, with tumbling and volatile equity markets headlining financial market turbulence. “Also, households won’t 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,” Moody’s Analytics stated.
India’s Response
Earlier today, Commerce and Industry Minister Piyush Goyal said that India is handling the reciprocal tariff issue “wisely”, aiming to increase its trade with the US by two and half times. He also asserted that India is already ahead in this race and discussions are taking good progress.
India is also working towards diversification of its trade and investment portfolio. It held discussions with over 10 countries in March alone and wishes to close ongoing free trade agreements or FTAs with New Zealand and European Union by this year.
