Moody's pegs India's GDP growth at 6.3 per cent for 2025

New Delhi, May 6 (IANS) Moody’s Ratings on Tuesday pegged India's GDP growth at 6.3 per cent for 2025 and expects the economy to pick up momentum in 2026 to record a 6.5 per cent growth rate.

Moody’s forecast is in line with the IMF outlook, which sees India as the only major economy in the world to record an over 6 per cent growth rate in 2025.

"Uncertainty surrounding global economic policies is likely to take a toll on consumer, business and financial activity," Moody’s said in its Global Macro Outlook’s May update. The rating agency had earlier projected a 6.5 per cent growth rate for India.

Despite a pause and reduction in some tariffs, policy uncertainty and trade tensions, especially between the US and China, are likely to dampen global trade and investment with consequences across the G20 countries, Moody’s said.

Besides trade uncertainties, rising tensions are likely to weigh down growth. Geopolitical stresses are another potential downside risk to the baseline forecasts, the rating agency said.

In recent days, tensions have flared up between India and Pakistan in South Asia and China and the Philippines in the South China Sea. These join unresolved wars in Russia and Ukraine, as well as the conflict in the Middle East, Moody’s observed.

"Costs to investors and businesses are likely to rise as they factor for new geopolitical configurations when deciding where to invest, expand and/or source goods," it added.

Moody’s, however, expects India’s inflation rate at 4 per cent in 2025 and 4.3 per cent in 2026, which will strengthen the macroeconomic fundamentals of the country and leave more headroom for the RBI to cut interest rates to spur growth.

"The Fed’s policy path is not as important a consideration for emerging market central banks as it was this time last year. Among other emerging market countries, we expect the Reserve Bank of India to lower rates further to support growth," Moody’s said.

The RBI has projected a 6.5 per cent GDP growth for India in 2025-26 amid global trade and policy uncertainties in the wake of the US tariff hikes.

RBI Governor Sanjay Malhotra recently said that "first and foremost, uncertainty in itself dampens growth by affecting investment and spending decisions of businesses and households. Second, the dent on global growth due to trade frictions will impede domestic growth. Third, higher tariffs will have a negative impact on net exports".

"However, there are several known unknowns - the impact of relative tariffs, the elasticities of our export and import demand, and the policy measures adopted by the government, including the proposed Foreign Trade Agreement with the USA," he said.

This makes the exact quantification of the adverse impact difficult, he pointed out.

Taking all these factors into consideration, real GDP growth for 2025-26 is now projected at 6.5 per cent, with Q1 at 6.5 per cent; Q2 at 6.7 per cent; Q3 at 6.6 per cent; and Q4 at 6.3 per cent, the RBI Governor said.

--IANS

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