Moody's Ratings revises forecast of India's 2025 GDP growth

Moody’s Ratings on Wednesday revised its forecast for India’s GDP growth downward from 6.6 per cent in February to a lower range of 5.5 to 6.5 per cent for calendar year 2025 amid a raft of new US tariffs.

The rating agency’s report on tariffs and trade turmoil said that the tariffs will weigh on global trade activity, reduce demand for regional exports, and undermine business confidence, leading to reduced investment in the Asia-Pacific region.

The revised growth forecast takes into account a scenario of 10 per cent universal tariffs and 145 per cent tariffs on China.

Moody’s Ratings noted that India had a relatively low overall exposure but more diversified exports to the US. It said that across the Asia-Pacific region as a whole, electronics, machinery and equipment, as well as food and textiles, are among the most exposed sectors to US demand.

The report also highlighted that the additional drag on the economy from the persistent uncertainty and heightened financial market stress could easily tip the US into a recession.

Moody’s Analytics, a division of Moody’s Ratings, had recently revised India’s GDP forecast for calendar year 2025 downward by 30 basis points to 6.1 per cent due to tariff threats from the US hitting gems and jewellery, medical devices, and textile industries the worst.

The United Nations Conference on Trade and Development (UNCTAD), while projecting global growth to slow to 2.3 per cent in 2025 due to escalating trade tensions, estimates that India will grow by 6.5 per cent in 2025 on the back of continued robust public spending and ongoing monetary easing.

“The decision of the central bank to cut the interest rate by 25 basis points for the first time in five years in early February will support household consumption as well as provide a boost to private investment plans,” the UNCTAD report said.

UNCTAD warned that the slowdown in global growth will affect all nations, especially the developing countries and the most vulnerable economies. Many low-income countries, it said, face a “perfect storm” of worsening external financial conditions, unsustainable debt, and weakening domestic growth.

“UNCTAD underlines the real threat to economic growth, investment, and development progress, particularly for the most vulnerable economies,” a press statement said.

The Asian Development Bank, in its April 2025 outlook report, has revised downward India’s GDP growth forecast for FY2025–26 to 6.7 per cent from 7 per cent earlier. It said: “A major risk arises from US tariff levies on India’s and other countries’ exports, which could reduce trade and investment flows and potentially create volatility in the domestic financial market.”

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