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Informist, Tuesday, Apr. 1, 2025

--Moody's: Indian econ has lower susceptibility to external financial shocks 

--Moody's: India growth to stay highest among advanced, emerging G-20 nations 

NEW DELHI - At a time when emerging economies could be impacted by the churn in US policies, the Indian economy is better positioned than most to attract and retain global capital in risk-averse conditions, Moody's Ratings said in a report Tuesday. 

"Emerging markets are exposed to choppy waters from the churn of US policies and its potential to reshape global capital flows, supply chains, trade and geopolitics," Moody's said. "Large EMs (emerging markets) have resources to navigate the turbulence. But smaller, open EMs are more vulnerable because they rely more on cross-border trade and investment for growth."

In the current global environment, growth will slow down in emerging market economies in 2025-26 but remain solid, Moody's said, adding that India's growth will remain the highest among the advanced and emerging Group of 20 countries, supported by tax measures and continued monetary policy easing.

Growth in India has moderated in recent months, after growing 9.2% in 2023-24 (Apr-Mar), and is seen growing 6.5% in FY25, as per the government's second advance estimate released in February end. This

slowdown in growth has prompted the government to announce income tax breaks in the Budget for FY26, while the Reserve Bank of India has begun easing interest rates. The government's Economic Survey has projected GDP growth between 6.3-6.8% for FY26, while the RBI forecasts current year's growth at 6.7%. 

US President Donald Trump has announced that Washington will impose reciprocal tariffs on all countries, including India, from Wednesday. The US has already levied tariffs on certain countries and industries such as steel and aluminium. 

With uncertainty over the global trade outlook growing, there is an increased risk of capital outflows from emerging economies. "Large, diversified and domestically driven EM economies such as India and Brazil are more equipped than smaller peers to continue attracting capital and withstand any cross-border outflows," Moody's said.

India and Brazil are better positioned to attract and retain global capital because of their large and domestically oriented economies, deep domestic capital markets, moderate policy credibility and substantial foreign exchange reserves, Moody's said. "India has a low external vulnerability indicator of 61%, indicating its relatively lower susceptibility to external financial shocks. This is supported by its relatively modest external debt to GDP ratio of 19% and low export dependency on the US (about 2% of GDP)."  End

Reported by Shubham Rana

Edited by Vandana Hingorani

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