Moody’s cuts GDP outlook to 6.1%

Moody’s Analytics on Thursday cut India’s GDP growth forecast to 6.1 per cent for 2025 on looming higher US reciprocal tariff threats.

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.

“We revised India’s GDP growth forecast to 6.1 per cent in 2025 from 6.4 per cent in our March baseline,” said the Moody’s report titled ‘APAC Outlook: US Versus Them’.

It said gems and jewellery, medical devices and textile industries will be among the worst hit.

Regardless, we expect overall growth to be relatively insulated from the shock since external demand makes up a relatively small portion of GDP, Moody’s Analytics said.

Given headline inflation has been easing at a healthy pace, we expect 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 said.

The negative and pervasive impact of a sustained rise in uncertainty cannot be understated, it added.