HOME > MARKETS > ECONOMY NEWS
  ECONOMY NEWS
ECONOMY
India’s GDP likely to slow down to 6% in FY26 if US implements 50% tariffs: Moody's
Aug-08-2025

Amid ongoing concerns over US’ tariff on India, Moody's Ratings has said the country’s Gross Domestic Product (GDP) growth is likely to slow down by about 30 basis points to 6% in the current fiscal (FY26) if the US implements 50% tariffs from August 27. However, he said that resilient domestic demand and the strength of the services sector will mitigate the strain on India, and added India's response to high US tariffs will ultimately determine the effect on its growth, inflation and external position.

Moody's said countries in Asia-Pacific are vying for a greater share of trade and investment flows amid a restructuring of supply chains triggered by US policy shifts. It said ‘Beyond 2025, the much wider tariff gap compared with other Asia-Pacific countries would severely curtail India’s ambitions to develop its manufacturing sector, particularly in higher value-added sectors, such as electronics, and may even reverse some of the gains made in recent years in attracting related investments’.

It said since 2022, India has increasingly ramped up its crude oil imports from Russia as demand from the latter's traditional offtakers dried up amid sanctions tied to its invasion of Ukraine. India has been able to procure at least some of its purchases of Russian oil at below global prices, which has helped insulate India's inflation from the pass-through of global commodity price movements, while preempting pressures on its current account deficit. India's imports of Russian crude rose to $56.8 billion in 2024 from $2.8 billion in 2021.

The agency said India retains sufficient foreign-reserve currency buffers to weather external volatility. It added ‘The magnitude of the drag on growth from tariff obstacles will influence the government's decision to pursue a fiscal policy response, although we anticipate the government will adhere to its focus on gradual fiscal and debt consolidation’.

  RELATED NEWS >>