India's GDP growth to hit 6.4% in 2025 weighed by exports amid US tariffs: Moody's Analytics

  • India's Gross Domestic Product (GDP) growth is set to shrink to 6.4 per cent in 2025, as compared to 6.6 per cent in 2024, Moody's Analytics has said in its latest report. This will happen largely due to new US tariffs and global softening of demand affecting exports.

Livemint
Published20 Feb 2025, 06:30 PM IST
India's GDP is expected to shrink further in upcoming years
India's GDP is expected to shrink further in upcoming years

India’s Gross Domestic Product (GDP) growth rate is expected to slow down further in 2025, Moody’s Analytics has said.

In a report on Thursday, Moody’s said that India’s GDP growth rate will slow down to 6.4 per cent in 2025, from 6.6 per cent that was recorded in 2024. This will be a result of new US tariffs and softening global demand weighing down on exports from the country.

Also Read | Fitch backs fiscal path, Moody’s worries over tax

In its report titled ‘Asia-Pacific Outlook: Chaos Ahead’, the credit rating house noted that the growth will slow down across the Asia-Pacific economy. Tensions in terms of trades, policy shifts, as well as uneven recoveries are set to knock the fortunes of the region, Moody’s Analytics warned.

"Growth across the region will slow as new tariffs and softening global demand weigh on exports," it said.

Also Read | Trump’s tariff plan poses risks for India-US bilateral trade: Goldman Sachs

India’s growth to shrink further, China’s GDP to slow down too

Moody’s further said that the Chinese GDP growth will slow to 4.2 per cent in 2025 and 3.9 per cent in 2026 from 5 per cent in 2024.

Growth in India will creep into the low-6 per cent range in the coming years from 6.6 per cent in 2024, it warned.

As per its APAC forecast, India's GDP is expected to grow 6.4 per cent both in 2025 and 2026 fiscal years.

Action required to sustain 6.4 per cent growth

In another report on January 29, Moody’s Analytics had highlighted the need to change its fiscal and monetary policy to achieve a 6.4 per cent GDP growth amid a weak rupee, declining foreign investment and volatile inflation.

Also Read | India will have GDP loss of 50 bps if US applies 20 pc reciprocal tariffs: SBI

“India is facing a bumpy road in 2025. A weakening rupee, declining foreign investment, and volatile inflation are the areas of greatest economic risk. Changes in fiscal and monetary policy, likely in the first half of the year, is needed if India is to achieve 6.4 per cent growth,” Moody's Analytics Associate Economist Aditi Raman said at the time.

Since then, India has taken action. On February 1, Finance Minister Nirmala Sitharaman during her Budget speech made huge changes to income tax rules, effectively making incomes up to 12 lakh tax-free.

The Reserve Bank of India stepped in a week later, cutting its repo rates to 6.25% from an earlier 6.5% during its Monetary Policy Committee meet.

(With inputs from PTI)

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