International research firm Moody’s Analytics has revised down India’s GDP growth forecast to 6.1% in 2025 from 6.4% in its March baseline, prompted by stiff new tariffs and tariff threats from the US. This anaylsis, however, was conducted before the US reciprocal tariffs were put in abeyance for 90 days.
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, it said in a report. Gems and jewellery, medical devices, and textile industries will be among the worst hit, Moody’s cautioned.
“Regardless, we expect overall growth to be relatively insulated from the shock since external demand makes up a relatively small portion of GDP,” Moody’s Analytics said in its latest Asia Pacific outlook.
Given that headline inflation has been easing at a healthy pace, it expect the Reserve Bank of India to lower interest rates, most likely in the form of 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,” it said
Stiff US reciprocal tariffs from the US prompted the research firm to downwardly revise growth targets for many Asia-Pacific economies. Its April baseline captures weaker growth prospects for China, Japan, Vietnam, Taiwan, India, Indonesia, South Korea, New Zealand, the Philippines, Australia, Singapore, Hong Kong and Malaysia.
In its monetary policy committee meeting on Wednesday, the RBI cut the repo rate by 25 basis points to 6%. MPC also decided to change the stance from neutral to accommodative. RBI has slashed its inflation projection for FY26 by 20 bps to 4%. Further analysis of inflationary expectations shows that RBI’s stance may be adaptive to inflation sentiment, reflecting a pre-emptive approach to macroeconomic management. Given the exacerbated uncertainties due to recent trade tariffs, RBI has reduced its real GDP growth projection for FY26 by 20 bps to 6.5%.