Moody’s Ratings on Tuesday slashed India’s GDP growth projection for 2025 down to 6.3%, from its earlier forecast of 6.5%, citing rising global policy uncertainty and trade restrictions. It further said that escalating geopolitical tensions between India and Pakistan posses potential downward risks for the forecast.
However, the ratings agency has retained India’s growth forecast at 6.5% for 2026, following an estimated 6.7% expansion in 2024.
In its Global Macro Outlook 2025-26 (May Update), Moody’s pointed to a broader global slowdown driven by heightened US policy uncertainty, trade tensions, and financial market volatility. The agency noted that global investors and businesses are recalibrating their strategies in response to shifting geopolitical dynamics, which is likely to increase costs and weigh on investment and expansion decisions.
Geopolitical risks, particularly in South Asia, are emerging as a potential drag on India’s growth prospects. The recent surge in India-Pakistan tensions has added to Moody’s list of concerns.
On April 22, terrorists opened fire in Pahalgam, Jammu & Kashmir, killing 26 tourists. Indian authorities have linked the attack to five identified terrorists, including three Pakistani nationals, intensifying cross-border tensions.
Moody’s also expects the Reserve Bank of India (RBI) to cut benchmark policy rates further in 2025 to support domestic economic growth.
Globally, Moody’s has downgraded its GDP growth projections for the US to 1% in 2025 (from 2%) and 1.5% in 2026, while China’s growth is expected to decelerate to 3.8% in 2025 and 3.9% in 2026, compared to 5% in 2024.
“Economic growth was already set to slow this year back to its potential rate,” Moody’s said. “We lowered our global growth projections for 2025 and 2026 further on account of the policy shifts and more intense policy uncertainty than we had previously expected, especially in the largest two economies, the US and China.”
Even with some easing of tariffs, Moody’s warned that policy uncertainty and ongoing trade tensions, particularly between the US and China, will likely dampen global trade and investment, impacting G-20 economies, including India.
Adding to concerns are unresolved international conflicts such as the wars in Ukraine and the Middle East, rising tensions in the South China Sea, and the broader volatility in financial markets, which Moody’s says could tighten liquidity and raise capital costs — further threatening economic stability.
(With inputs from ANI)
However, the ratings agency has retained India’s growth forecast at 6.5% for 2026, following an estimated 6.7% expansion in 2024.
In its Global Macro Outlook 2025-26 (May Update), Moody’s pointed to a broader global slowdown driven by heightened US policy uncertainty, trade tensions, and financial market volatility. The agency noted that global investors and businesses are recalibrating their strategies in response to shifting geopolitical dynamics, which is likely to increase costs and weigh on investment and expansion decisions.
Geopolitical risks, particularly in South Asia, are emerging as a potential drag on India’s growth prospects. The recent surge in India-Pakistan tensions has added to Moody’s list of concerns.
On April 22, terrorists opened fire in Pahalgam, Jammu & Kashmir, killing 26 tourists. Indian authorities have linked the attack to five identified terrorists, including three Pakistani nationals, intensifying cross-border tensions.
Moody’s also expects the Reserve Bank of India (RBI) to cut benchmark policy rates further in 2025 to support domestic economic growth.
Globally, Moody’s has downgraded its GDP growth projections for the US to 1% in 2025 (from 2%) and 1.5% in 2026, while China’s growth is expected to decelerate to 3.8% in 2025 and 3.9% in 2026, compared to 5% in 2024.
“Economic growth was already set to slow this year back to its potential rate,” Moody’s said. “We lowered our global growth projections for 2025 and 2026 further on account of the policy shifts and more intense policy uncertainty than we had previously expected, especially in the largest two economies, the US and China.”
Even with some easing of tariffs, Moody’s warned that policy uncertainty and ongoing trade tensions, particularly between the US and China, will likely dampen global trade and investment, impacting G-20 economies, including India.
Adding to concerns are unresolved international conflicts such as the wars in Ukraine and the Middle East, rising tensions in the South China Sea, and the broader volatility in financial markets, which Moody’s says could tighten liquidity and raise capital costs — further threatening economic stability.
(With inputs from ANI)
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