Moody's Forecasts India's GDP Growth Slowdown Amid Rising US Tariffs

Moody's predicts India's GDP may slow by 30 basis points to 6% if the US enforces 50% tariffs. Domestic demand and service sector strength may mitigate this impact. India is negotiating a trade agreement with the US, amid tensions due to its ongoing purchase of Russian oil.

Moody's Ratings on Friday warned that the growth of India's GDP could moderate by approximately 0.3 percentage points, to 6% in the current fiscal year. This development hinges on the US implementing a 50% tariff on Indian imports starting August 27.

The US announced an additional 25% tariff on all imports from India, raising the total to 50%, as a reaction to India's continued purchase of Russian oil. The White House justifies the measures as part of its strategic response to geopolitical tensions involving Russia.

Despite these challenges, Moody's believes that India's resilient domestic demand and robust service sector could help cushion the economic impact. Meanwhile, India and the US are engaged in negotiations to finalize a bilateral trade agreement, aimed at boosting trade flows substantially by 2030.