Moody’s rating on Indian economy: India is in good condition to withstand the negative effects of American tariffs and global trade obstacles. India’s domestic development driver and low dependence on exports are supporting the economy. According to news agency PTI, global rating agency Moody’s Ratings made this predicted in a statement on Wednesday.
The rating agency said in a statement that the government initiative to promote private consumption, expand production capacity and increase spending on infrastructure would help to remove the disappointing forecast of weak global demand. Decreased inflation will reduce interest rates, which will further boost the economy. In addition, increasing liquidity in the banking sector will make it easier to give loans.
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Moody’s said, “India is in a better position to face American tax and global trade obstacles as compared to many other emerging markets, as India is in good condition due to strong internal development factors, strong domestic economy and low dependence on commodity trade.”
Earlier this month, the rating agency had reduced India’s GDP development estimate for 2025 from 6.7 percent to 6.3 percent. Despite this, this rate will be the highest in G20 countries. The rating agency had changed its GDP forecast after a situation arising out of the declaration of tariff growth by the US.
Tension with India has more impact on Pakistan
Moody’s says that the tension between India and Pakistan, especially in early May, will have a major impact on Pakistan’s economic growth rate (Pakistan GDP growth), while it will have a limited impact on India.
Moody’s said, “Even if domestic tension continues, we do not expect any major disruption in India’s economic activities, as India’s economic relations with Pakistan are very limited. In addition, most Indian states producing agricultural and industrial products are far from geographically conflict affected areas.”
However, an increase in defense spending may put pressure on India’s fiscal strength and slow the pace of fiscal consolidation.
Investment in infrastructure will boost GDP
Moody’s says that the Indian government’s investment in the infrastructure is promoting GDP growth, while individual income tax reduction is promoting consumption.
India’s limited dependence on goods trade and strong services sector protects it to a great extent from the fees levied by the US. However, the automobile sectors such as areas that export to the US to some extent, may face challenges in global trade.
In early April, the Trump administration announced a mutual tariff with countries around the world. Which was later postponed for 90 days. It retained a 10% base tariff with discounts for some areas, while tariffs on areas such as steel and aluminum are already high.
