Moody's Analytics has revised India's 2025 growth forecast down by 30 basis points compared to its March estimate, and now expects GDP growth of 6.1%. The downgrade follows the recent imposition of U.S. tariffs.
Although President Donald Trump announced a 90-day freeze on most of the harsher tariffs and replaced them with a 10% general duty, Moody’s said its April forecast reflects the potential economic impact if the full set of tariffs is implemented.
The U.S., a key trading partner for India, recently imposed 26% tariffs on Indian goods, though most of these have been temporarily paused. Moody’s identified sectors like gems and jewellery, medical devices, and textiles as the most vulnerable.
Despite this, overall economic growth may remain relatively stable, as external demand represents a small share of India’s GDP.
In response to slowing growth and tariff pressures, the Reserve Bank of India cut its key repo rate for the second time and adopted an "accommodative" policy stance, suggesting further rate cuts may follow.
While the full impact of tariffs remains uncertain, Moody’s expects the RBI to lower the repo rate to 5.75% by the end of 2025. Combined with earlier tax incentives, this could help offset the tariff shock and support domestic growth more effectively than in other exposed economies.