Moody's Ratings on Tuesday has cut India's gross domestic product (GDP) growth projections for the calendar year 2025 to 6.3%, from earlier 6.5%, due to rising global policy uncertainty and trade restrictions. It also flagged India's growing tension with Pakistan as threat to its growth.
Moody's in its Global Macro Outlook 2025-26 report said geopolitical stresses, like tension between India and Pakistan, also have a potential downside risk to its baseline growth forecasts.
The ratings agency also highlighted a broader global slowdown driven by heightened US policy uncertainty, trade tensions, and financial market volatility. 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, Moody's said.
However, it has kept India’s growth forecast at 6.5% for 2026 unchanged, following an estimated 6.7% expansion in 2024. Moody's expects the Reserve Bank of India to lower benchmark policy rates further to support growth. In its April review, the RBI’s monetary policy committee (MPC) has delivered its second consecutive rate cut of 25 basis points (bps), bringing the key repo rate down to 6%.
Commenting on the global GDP growth projections, it has estimated downgraded its GDP growth projections for the US to 1% in 2025 from 2% and 1.5% in 2026. Meanwhile, China’s growth is expected to decelerate to 3.8% in 2025 and 3.9% in 2026 against 5% in 2024.
Moody's has warned that persistent policy uncertainty, especially amid US-China trade tensions, is likely to weigh down consumer demand, business sentiment and financial activity, dragging on global trade and growth across the G-20.
Moody's forecast follows the International Monetary Fund (IMF) and the World Bank's projections. The IMF has lowered India’s growth forecast to 6.2% for FY26 from 6.5% projected earlier. Likewise, The World Bank also trimmed India's growth to 6.3% in FY26.
