#India economy# Moody’s Ratings# US Tariffs# global trade disruption# GDP growth# infrastructure investment# fiscal consolidation
IBNS-CMEDIA: India is relatively shielded from the adverse impact of US tariffs and global trade turbulence, thanks to strong domestic growth drivers and a low reliance on exports, Moody’s Ratings said in a note on Wednesday.
According to the agency, government measures to stimulate private consumption, enhance manufacturing capacity, and ramp up infrastructure investment are expected to counterbalance the softer global demand outlook, reported PTI.
“India is better positioned than many other emerging markets to deal with US tariffs and global trade disruptions, helped by robust internal growth drivers, a sizable domestic economy and a low dependence on goods trade,” Moody’s said.
The report noted that moderating inflation could pave the way for interest rate reductions to further bolster the economy, while adequate liquidity in the banking sector supports continued lending.
In addition to global trade risks, Moody’s also commented on regional tensions, particularly between India and Pakistan.
The agency observed that the flare-up earlier in May is likely to hurt Pakistan’s growth prospects more than India’s.
“In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India’s economic activity because it has minimal economic relations with Pakistan. Moreover, the parts of India that produce most of its agricultural and industrial output are geographically distant from the conflict zones,” Moody’s stated.
However, it added that any increase in defence spending could strain India’s fiscal position and slow the pace of fiscal consolidation.
Government-led infrastructure spending continues to be a key driver of GDP, while personal income tax cuts are aiding consumption.
India’s limited dependence on goods trade, coupled with a strong services sector, helps cushion the economy from the effects of US tariffs.
That said, certain export-linked sectors like automobiles, which maintain some exposure to the US market, remain vulnerable to global trade volatility despite their diversified operations.
Earlier in May, Moody’s trimmed its growth forecast for India in calendar year 2025 to 6.3%, down from 6.7%. Despite the downward revision, India is still projected to log the fastest growth among G-20 economies.
The development comes after the US administration, in early April, announced sweeping, country-specific tariffs on trading partners—though implementation was subsequently paused for 90 days.
The base tariff remains at 10%, with select sectoral exemptions, while higher duties continue to apply to areas like steel and aluminium.
