Moody’s Lowers India’s 2025 GDP Growth Forecast to 6.3%

Moody’s Investors Service has revised its GDP growth forecast for India, lowering it to 6.3% for 2025, down from an earlier estimate of 6.5%. This adjustment comes amid rising global policy uncertainties and trade restrictions. The agency also pointed to escalating geopolitical tensions between India and Pakistan as potential risks to India’s economic outlook. Despite these challenges, Moody’s has maintained its growth prediction for India at 6.5% for 2026, following a projected growth of 6.7% in 2024.

Global Economic Context

In its latest Global Macro Outlook report, Moody’s highlighted a broader slowdown in global economic growth, driven by increased uncertainty in U.S. policies, ongoing trade conflicts, and volatile financial markets. The agency noted that international investors and corporations are adapting their strategies in response to these shifting geopolitical landscapes. This adaptation may lead to higher operational costs and could influence investment decisions across various sectors. Moody’s has also revised its GDP growth forecast for the United States to 1% for 2025, down from 2%, and 1.5% for 2026. Similarly, China’s economic growth is expected to decelerate to 3.8% in 2025 and 3.9% in 2026, compared to 5% in 2024.

Geopolitical Risks and Domestic Implications

The report underscores that geopolitical challenges, particularly in South Asia, are emerging as significant barriers to India’s economic progress. The recent deterioration in relations between India and Pakistan has raised concerns for Moody’s, which views these tensions as detrimental to the country’s growth prospects. The agency anticipates that the Reserve Bank of India (RBI) will likely implement further reductions in benchmark policy rates in 2025 to stimulate domestic economic activity. This move aims to counterbalance the adverse effects of external uncertainties and bolster growth.

Broader Global Challenges

Moody’s also pointed out that ongoing conflicts in regions such as Ukraine and the Middle East, along with rising tensions in the South China Sea, could further complicate the global economic landscape. These factors may restrict liquidity and increase capital costs, potentially destabilizing economic conditions worldwide. The agency warns that persistent trade disagreements, especially between the U.S. and China, could have far-reaching implications for global trade and investment, impacting G-20 nations, including India. The overall outlook suggests that while some tariff reductions may occur, the underlying policy uncertainties are likely to continue affecting economic stability.

Future Projections

Despite the challenges, Moody’s maintains a cautiously optimistic view for India’s economy in the medium term. The agency’s growth forecast for 2026 remains unchanged at 6.5%, reflecting a belief in India’s resilience amid global headwinds. As the country navigates these complexities, the focus will be on how effectively it can leverage its economic strengths while addressing the risks posed by geopolitical tensions and global economic shifts.

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