Moody’s Ratings has revised India’s GDP growth forecast for 2025 down to 6.3%, from its earlier estimate of 6.5%, citing increasing global policy uncertainty, particularly around trade tariffs and geopolitical tensions. The agency has also flagged recent India-Pakistan tensions as an emerging threat to the country’s economic trajectory.
This downgrade follows the April 22 terror attack in Pahalgam, Jammu & Kashmir, which killed 26 tourists and has raised security and diplomatic concerns in the region.
Outlook Remains Stable for 2026
Despite the reduced forecast for 2025, Moody’s has maintained India’s GDP growth projection at 6.5% for 2026, following an estimated 6.7% growth in 2024. This suggests that the medium-term outlook for the Indian economy remains relatively stable.
The changes were announced in Moody’s Global Macro Outlook 2025-26 (May Update), which paints a broader picture of slowing global growth due to:
- Heightened trade tensions
- US policy unpredictability
- Financial market instability
- Rising geopolitical friction globally and in South Asia
RBI Expected to Cut Rates in 2025
To cushion against global headwinds and stimulate domestic consumption, Moody’s anticipates that the Reserve Bank of India (RBI) will implement further interest rate cuts in 2025.
Global Slowdown: US and China Also Affected
India isn’t alone in facing downward economic revisions:
- US GDP forecast for 2025 was slashed to 1% (from 2%)
- China’s GDP forecast was trimmed to 3.8% in 2025 and 3.9% in 2026, down from 5% in 2024
Moody’s cited the lasting impact of Trump-era trade policies, possible tariff escalations, and investor hesitation due to volatile global financial conditions.
Additional Risk Factors
Other contributing global risk elements include:
- The ongoing Russia-Ukraine war
- Middle East conflicts
- Rising South China Sea tensions
- Increased capital costs and reduced liquidity
These issues could collectively strain global investment, increase operational risks, and place additional pressure on developing economies like India.
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