Rating agency Moody’s has revised India's GDP growth forecast to 6.1% in 2025 from its March estimate of 6.4% as the threat of 26% tariff hangs over India. Though US President Donald Trump has put on hold the harsh country-wise reciprocal tariffs for 90 days, and applied a 10% blanket tariff in their place, Moody’s says their April estimates represent the economic toll most countries will have should the US government eventually go ahead in full.
According to Moody’s the US is one of India's largest trading partners, so a 26% tariff hovering over imports of Indian goods will heavily impede the trade balance. According to it, gems and jewellery, medical devices, and textile industries will be among the worst hit.
However, it feels the overall growth to be relatively insulated from the shock since external demand makes up a relatively small portion of GDP.
Moody’s says given headline inflation has been easing at a healthy pace, it expects the Reserve Bank of India to lower interest rates, most likely in the form of another 25-basis point cuts that take the policy rate to 5.75% by the end of the year.
“This, 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,” Moody’s said in a note issued on Thursday.
Meanwhile, Nomura in a note says it has revised lower its FY26 GDP growth projection to 5.8% y-o-y (from 6.0%), reflecting the global tariff-driven disruptions.
It says while it agrees with the RBI’s inflation outlook of 4% for FY26, but sees the Central Bank’s GDP growth forecast of 6.5% as optimistic. The RBI has lowered the FY26 GDP growth estimate by 20 basis points to 6.7%.