US tariff impact: Moody's Analytics cuts India's 2025 GDP forecast to 6.1%

Moody's Analytics said that its April baseline represents the economic toll they'll have should the tariffs eventually go ahead in full

Moody’s Analytics on Thursday revised its India gross domestic product (GDP) forecast for calendar year 2025 (CY25) downward by 30 basis points (bps) to 6.1 per cent due to tariff threats from the US hitting gems and jewellery, medical devices, and textile industries.

 

“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, a division of Moody’s Ratings said.

 

Acknowledging the 90-day freeze on most tariffs and the 10 per cent blanket in their place, Moody’s Analytics said that its April baseline represents the economic toll should the tariffs eventually go ahead in full.

 

In the context of India, Moody’s Analytics expects the overall growth to be relatively insulated from the shock since external demand makes up a relatively small portion of GDP.

 

Given the ease in headline inflation, Moody’s Analytics expects the Reserve Bank of India to lower interest rates, most likely in the form of 25 bps cuts that take the policy rate to 5.75 per cent by the end of CY25. 

 

“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 stated. 

 

Moody’s Analytics added that uncertainty is palpable, with tumbling and volatile equity markets headlining financial market turbulence. “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 (the) chaos.”