India GDP Growth: India gets a shock on the economic front! Moody's reduces GDP growth forecast

India GDP Growth: In the tense environment of tariff war, India has suffered a major setback on the economic front. Moody's Analytics, an organization providing global financial services, has reduced the GDP growth forecast for 2025 in its latest report on India's economic growth rate. Earlier, while this growth was estimated at 6.4%, now it has been reduced to 6.1%.

Shadow of American tariff

According to Moody's Analytics, this revision has been done mainly in view of the threat of imposing tariffs on gems and jewellery, medical equipment and textile industries by the US. The US is the largest trading partner for India, and the possibility of the US imposing duties of up to 26% on imports can have a serious impact on India's trade balance.

Relief for now, but temporary

The report also said that the US administration has currently deferred most of the tariffs for 90 days, and an interim rate of 10% has been imposed in their place. However, if these tariffs are fully implemented, India may have to suffer a major economic loss.

Little hope from tax incentives

Moody's believes that the tax incentives announced by the Government of India at the beginning of the year will boost domestic demand, thereby reducing the negative effects of tariffs to some extent. Due to these incentives, India will be in a better position than other emerging economies.

RBI expected to cut repo rate

Moody's Analytics has also indicated that the Reserve Bank of India (RBI) may soon ease its monetary policy in view of the steady decline in inflation in the country. According to the report, by the end of the year, RBI may cut the repo rate by 0.25%, bringing it to 5.75%. Currently RBI's repo rate is 6%.

Eye on inflation rate

Along with this, the Reserve Bank has set a target of bringing the inflation rate forecast to 4% for the financial year 2026. This indicates that the economic policy is now moving towards stimulating demand.

Tariff tension in the global scenario

It is worth noting that US President Donald Trump has postponed the proposed tariff on 75 countries for the time being for 90 days. However, without giving any concession to China, the tariff rate for it has been increased to 125%.