Despite Tariffs, India’s Economy to Remain Strongest in G-20: Moody’s Report

Moody’s Ratings has expressed confidence in India’s ability to manage the challenges arising from US tariffs and disruptions in global trade. According to the report, India stands out among emerging markets due to its robust internal growth drivers, limited export dependence, and strong domestic consumption base.

Domestic Growth Shields India from Global Trade Shocks

India’s economic structure is predominantly inward-facing. Moody’s notes that the country’s large domestic economy helps cushion it from fluctuations in global demand. The government’s proactive measures to stimulate private consumption and expand manufacturing and infrastructure capacity provide additional support.

The report highlights that easing inflation could lead to interest rate reductions, which would further strengthen the economy. India’s banking sector, with its ample liquidity, is also well-equipped to facilitate credit growth.

Read More: India Will Record the Highest GDP Growth Among G20 Nations by FY26: Moody’s Report. 

Low Export Dependence Reduces Tariff Impact

One of the key reasons behind India’s resilience is its relatively low dependence on the trade of goods. Sectors that rely on exports, such as automobiles, do face some exposure to global trade volatility. However, their diversified business models help mitigate potential risks.

The growing service sector also plays a crucial role in supporting economic stability, making India less vulnerable to external shocks.

Regional Tensions Unlikely to Disrupt Economic Activity

The report also addresses geopolitical concerns, particularly the recent tensions between India and Pakistan. Moody’s believes that these developments are unlikely to have a significant impact on India’s economic activity. Most of the country’s agricultural and industrial output comes from regions that are distant from potential conflict zones.

India’s minimal economic ties with Pakistan further insulate it from any direct trade-related fallout.

Fiscal Caution Remains Important

While India’s central government continues to invest heavily in infrastructure, Moody’s cautions that any significant increase in defence spending could pose fiscal challenges. Higher outlays in this area might slow down the pace of fiscal consolidation.

Nonetheless, initiatives such as personal income tax cuts and ongoing infrastructure development are expected to keep supporting overall economic growth.

India to Lead G-20 in Growth Despite Downward Revision

Moody’s recently adjusted India’s economic growth forecast for 2025, bringing it down from 6.7% to 6.3%. Despite this downward revision, India is still projected to record the highest growth among G-20 nations.

The report’s overall tone remains positive, as the country continues to demonstrate economic resilience in the face of global uncertainties.

Global Tariff Environment

In early April, the US administration introduced new tariffs targeting specific countries. While a blanket implementation was paused for 90 days, some sectors such as steel and aluminium remain under higher tariffs. A base tariff of 10% continues, with selective exemptions.

Conclusion 

Although these measures contribute to global trade tensions, India’s limited reliance on goods exports and its strong domestic market position compare favourably with many of its peers.

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