Moody's cuts India's 2025 GDP growth forecast to 6.3% amid trade tensions

International ratings agency Moody's has cut India's gross domestic product (GDP) growth projection for 2025 to 6.3%, from 6.5% earlier, citing an expected slowdown in global economies amid the US trade policies and subsequent restrictions. However, the growth forecast for 2026 has been retained at 6.5%.

The ratings agency, in its May update of the Global Macro Outlook 2025-26, has said the current geopolitical stress caused by tensions between India and Pakistan could also pose downside risks to India's baseline growth estimates. "Costs to investors and businesses are likely to rise as they factor in new geopolitical configurations when deciding where to invest, expand, and/or source goods," Moody's said. The ratings agency also expects the central bank to cut key lending rates in the coming Monetary Policy Committee (MPC) meeting.

Notably, Moody's Analytics, the data, analytics, and software solutions arm of Moody's Corporation, in April 2025 had also revised India's GDP growth forecast to 6.1% in 2025 from 6.4% in its March baseline. "The U.S. is one of India's largest trading partners, so a 26% tariff hovering over imports of Indian goods will heavily impede the trade balance,” Moody’s Analytics said.

The International Monetary Fund, in its April update to the World Economic Outlook (WEO) 2025, also slashed its FY26 growth forecast for India by 30 basis points to 6.2% from 6.5% amid trade tensions and global uncertainty. "For India, the growth outlook is relatively more stable at 6.2 per cent in 2025 (2025–26), supported by private consumption, particularly in rural areas, but this rate is 0.3 percentage points lower than that in the January 2025 WEO Update on account of higher levels of trade tensions and global uncertainty," the IMF said.

For the current fiscal year, Moody's growth estimates are similar to the RBI's forecast of 6.5%. “Headwinds from global trade disruption continue to pose downward risks. Taking all these factors into consideration, real GDP is now projected for this fiscal 2025-26 at 6.5% with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%,” said the RBI in the April MPC meeting.