Moody’s Ratings on Tuesday pegged India’s GDP growth at 6.3 percent for 2025 and expects the economy to pick up momentum in 2026 and record a 6.5 percent growth rate.
Moody’s forecast aligns with the IMF outlook, which sees India as the only major economy to record an over 6 percent growth rate in 2025.
“Uncertainty surrounding global economic policies is likely to take a toll on consumer, business, and financial activity,” Moody’s said in its Global Macro Outlook’s May update. The rating agency had earlier projected a 6.5 per cent growth rate for India.
Moody’s said that despite a pause and reduction in some tariffs, policy uncertainty and trade tensions, especially between the US and China, are likely to dampen global trade and investment and have consequences across the G20 countries.
Rising tensions are likely to weigh down growth, in addition to trade uncertainties. The rating agency said geopolitical stresses are another potential downside risk to the baseline forecasts.
In recent days, tensions have flared up between India and Pakistan in South Asia and China and the Philippines in the South China Sea. These conflicts join unresolved wars in Russia and Ukraine and the conflict in the Middle East, Moody’s observed.
“Costs to investors and businesses are likely to rise as they factor in new geopolitical configurations when deciding where to invest, expand, and/or source goods,” it added.
Moody’s, however, expects India’s inflation rate to be 4 percent in 2025 and 4.3 percent in 2026, which will strengthen the country’s macroeconomic fundamentals and leave more headroom for the RBI to cut interest rates to spur growth.
“The Fed’s policy path is not as important a consideration for emerging market central banks as last year. Among other emerging market countries, we expect the Reserve Bank of India to lower rates further to support growth,” Moody’s said.
The RBI has projected 6.5 percent GDP growth for India in 2025-26 amid global trade and policy uncertainties arising from the US tariff hikes.
RBI Governor Sanjay Malhotra recently said that “first and foremost, uncertainty dampens growth by affecting investment and spending decisions of businesses and households. Second, the dent on global growth due to trade frictions will impede domestic growth. Third, higher tariffs will hurt net exports”.
“However, there are several known unknowns – the impact of relative tariffs, the elasticities of our export and import demand, and the policy measures adopted by the government, including the proposed Foreign Trade Agreement with the USA,” he said.
This makes the exact quantification of the adverse impact difficult, he pointed out.
Considering all these factors, the RBI governor said real GDP growth for 2025-26 is now projected at 6.5 percent, with Q1 at 6.5 percent, Q2 at 6.7 percent, Q3 at 6.6 percent, and Q4 at 6.3 percent.
–IANS
