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Informist, Friday, Apr. 11, 2025

 

NEW DELHI - Moody's Analytics has lowered its forecast for India's GDP growth in 2025 by 30 basis points to 6.1%, citing impact from the 26% reciprocal tariffs imposed by the US, which have now been paused till Jul. 9. As the US is one of India's largest trading partners, a 26% tariff on imports of Indian goods will heavily impede the trade balance, Moody's Analytics said in a report.

 

"Although US President Donald Trump has just declared a 90-day freeze on most of the harsh tariffs announced a week ago and applied a 10% blanket tariff in their place, the April baseline represents the economic toll they'll have should they eventually go ahead in full," the report said. 

 

Gems and jewellery, medical devices, and textile industries will be among the worst hit sectors in India, the report said. However, overall growth will be relatively insulated from the tariff hit since external demand makes up a relatively small portion of India's GDP, it added.

 

Moody's Analytics is the latest to downgrade India's growth forecast because of the US' trade policies. The Reserve Bank of India Wednesday lowered its GDP growth forecast for 2025-26 (Apr-Mar) by 20 bps to 6.5%, citing the impact of global trade and policy uncertainties. The central bank is likely to lower the policy rate to 5.75% by the end of the year from 6.00% at present as headline inflation has been easing at a healthy pace, the report said. The RBI's Monetary Policy Committee Wednesday reduced the policy repo rate by 25 bps for the second consecutive meeting to 6.00%.

 

"This (lower interest rates), 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, the report said.  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani

 

 

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