Moody's Lowers India's GDP Growth Forecast to 6.3%, Citing Global Trade Uncertainty and Geopolitical Tensions; 2026 Growth Remains at 6.5%
India's GDP forecast: Global rating agency Moody's has lowered its forecast for India's GDP growth to 6.3% for 2025, down from its previous estimate of 6.5%. Moody's attributed this decision to global trade uncertainties, geopolitical tensions, and particularly, escalating tensions between India and Pakistan. The agency suggests these factors could increase pressure on investors and businesses, slowing India's economic growth.
Geopolitical Tensions and Global Trade Uncertainties
According to Moody's, rising geopolitical tensions between India and Pakistan have impacted India's growth rate. Furthermore, uncertainty in US trade policy and challenges in global trade could negatively affect the Indian economy. The agency states that these circumstances necessitate caution among investors and businesses when making decisions, potentially impacting their trade and investments.
6.5% Growth Forecast for 2026
While Moody's lowered its India's GDP growth forecast for 2025, it maintained its projection at 6.5% for 2026. Moody's believes that the Reserve Bank of India (RBI) could stimulate economic growth in 2026 by reducing policy rates. India's GDP growth was projected at 6.7% in 2024, now expected to decrease to 6.3% in 2025.
Impact on Global Growth
Moody's report indicates that not only India, but other major economies also face challenges. Growth projections have been lowered for both the US and China. Moody's estimates US GDP growth at 1% in 2025 and China's at 3.8%. This could negatively impact the global economic landscape, consequently affecting India's economy.
Pressure on Pakistan's Economy Due to Tensions
Moody's also expressed concern regarding Pakistan's situation. Escalating tensions between India and Pakistan could further strain Pakistan's already weak economy. Moody's suggests that increased tensions could hinder Pakistan's ability to secure foreign funding, putting pressure on its foreign exchange reserves. This poses a significant threat to Pakistan's financial stability, particularly considering its substantial foreign debt repayments in the coming years. A disruption in funding could worsen Pakistan's situation.
Implications for India
This report serves as a warning for India. While a decline in 2025 GDP growth is anticipated, the situation may improve in 2026. India will need to navigate both global and domestic challenges. Geopolitical tensions, global trade uncertainty, and policy changes could make the coming period challenging for the Indian economy.
