In its latest assessment, Moody’s Investors Service has reduced India’s GDP growth projection for 2025 to 6.3%, a downward revision from its previous estimate of 6.5%. The cut reflects a broader slowdown in the global economy, driven by trade policy shifts in the U.S., lower growth expectations in major economies, and heightened geopolitical risks.
One of the primary drivers of the revision is the increasing uncertainty in U.S. trade policy. The U.S. has implemented a blanket 10% tariff on imports, with potential for additional duties. While several trading partners have not yet retaliated, the unpredictability of future U.S. trade actions is creating a ripple effect across global markets, influencing both investment decisions and trade flows.
Adding to the concerns is the global slowdown. Moody’s now expects the U.S. economy to grow just 1% in 2025, compared to its earlier projection of 2%. Similarly, China’s growth forecast has been cut to 3.8% from 5%. These revisions stem from continued policy frictions, particularly between the U.S. and China, that threaten to reshape global supply chains and weigh on investor sentiment.
Moody’s also noted that geopolitical tensions, including strained relations between India and Pakistan and other international conflicts, could further impact India’s economic performance. These factors often lead to higher operational risks and costs for global businesses, potentially dampening investor confidence in emerging markets like India.
Despite the short-term headwinds, Moody’s has kept its GDP growth forecast for India in 2026 at 6.5%, reflecting resilience in domestic fundamentals and a belief that medium-term prospects remain strong. The agency anticipates that policy easing by the Reserve Bank of India (RBI)—including potential interest rate cuts—could help cushion the domestic economy against external shocks.
India continues to be viewed as a high-potential market over the longer term, supported by domestic demand, structural reforms, and a young workforce. However, Moody’s emphasized that external risks will need to be carefully managed to maintain momentum.