India GDP Growth / Moody's mood changed, made this reversal in the GDP growth forecast for India for 2025

Moody's Analytics has lowered India's 2025 GDP growth forecast from 6.4% to 6.1% due to rising US tariff threats. According to the report, domestic demand will be the key support, while a rate cut of 0.25% is expected from the RBI.

India GDP Growth: Global rating agency Moody's Analytics on Thursday cut its forecast for India's gross domestic product (GDP) growth rate for 2025. The agency has reduced its forecast from 6.4 percent to 6.1 percent. This revision has been done keeping in mind the aggressive trade policies of the US and the growing threat of reciprocal tariffs.

Impact of global trade tensions

In a report titled 'APAC Outlook: US vs Them', Moody's has warned that instability in global trade and steps like tariff hikes by the US could impact India's economic prospects. According to the report, industries such as gems and jewellery, medical equipment and textiles will be affected the most.

However, the agency also believes that India's overall economic growth will not suffer a major setback, as external demand is a relatively small part of India's GDP. It is expected that domestic consumption will help keep India's growth rate stable.

Possible cut in interest rates

Moody's has predicted that the Reserve Bank of India (RBI) may further ease monetary policy. According to the report, a 25 basis point cut in the repo rate is possible, bringing it to 5.75 percent. This is expected to boost domestic investment and consumption, which can reduce the impact of US tariffs.

Along with this, the tax incentive schemes announced at the beginning of the year can also prove to be helpful in boosting domestic demand.

Temporary relief in US policy

US President Donald Trump has recently announced a suspension of reciprocal tariffs for 90 days. This move is regarding the tariffs applicable to 75 countries with which the US has a trade imbalance. India has also got temporary relief from this, as the 26 percent additional duty on exports to the US has been deferred for the time being.

However, the US tariffs on China continue to tighten, putting pressure on the global supply chain and also pose an indirect risk to India.

Impact on domestic sentiment and investment

Moody's has warned that the ever-increasing uncertainty and volatile stock markets are weakening household and business morale. When the future is uncertain, families cut back on spending and businesses hold back on investment. This can impact the pace of economic activity.