Moody’s Cuts India’s 2025 GDP Forecast to 6.3% Amid Global Trade Uncertainty

In a cautious update to its Global Macro Outlook, Moody’s Ratings has revised India’s GDP growth forecast for the calendar year 2025 down to 6.3%, citing heightened global policy uncertainty, especially from the United States, persistent trade tensions, and increasing geopolitical risks as major contributing factors. The agency, however, retained its growth projection for 2026 at 6.5%, reflecting expectations of eventual economic stabilization.

Why in News?

Moody’s Ratings released its Global Macro Outlook 2025-26 (May Update), wherein it lowered India’s GDP growth estimate for 2025 from 6.5% to 6.3% due to Rising US policy and trade uncertainty, Geopolitical tensions (including India-Pakistan conflict), Global financial market volatility.

Key Highlights from Moody’s Report

• India’s GDP forecast for 2025: Cut to 6.3% (earlier 6.5%)
• GDP forecast for 2026: Maintained at 6.5%
• 2024 growth: Estimated at 6.7%
• RBI expected to ease policy rates further to support growth

Risks Identified

Geopolitical Tensions

• India-Pakistan (e.g., Pahalgam terror attack),
• South China Sea (China-Philippines tension),
• Ongoing conflicts in Ukraine, Russia, and Middle East.

Financial Volatility

• April witnessed increased market risk aversion,
• Risk of tightening liquidity and high capital costs.

Moody’s Observations

• Policy unpredictability may dampen consumer/business confidence.
• Even with paused/reduced tariffs, trade tensions linger.
• Investors are more cautious about cross-border investments.