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Moody's Analytics revises India's GDP growth forecast to 6.1% for 2025

11 Apr 2025 Evaluate

Amid looming higher US reciprocal tariff threats, Moody's Analytics in its report titled 'APAC Outlook: U.S. Versus Them' has revised India's Gross Domestic Product (GDP) growth forecast to 6.1 per cent for 2025 from 6.4 per cent in its March baseline. It 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 said gems and jewellery, medical devices, and textile industries will be among the worst hit. 

Regardless, it expects overall growth to be relatively insulated from the shock since external demand makes up a relatively small portion of GDP. Given headline inflation has been easing at a healthy pace, it expects the Reserve Bank of India to lower interest rates, most likely in the form of 25-basis point cuts that take the policy rate to 5.75 per cent by the end of the year. 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.

Moody's Analytics said uncertainty is palpable, with tumbling and volatile equity markets headlining financial market turbulence. It said the negative and pervasive impact of a sustained rise in uncertainty cannot be understated. Household and business sentiment is crumbling, and if the calamity continues, monetary policy easing that was supposed to characterise 2025 will lose some of its potency. 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. As tariffs increase the cost and complexity of trade, they weaken global growth prospects.


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