Moody's Ratings has reduced India's GDP growth forecast for 2025 to 6.3% from 6.5%, attributing the revision to heightened global policy uncertainty and trade limitations. The agency has also highlighted that increasing geopolitical friction between India and Pakistan presents possible risks to this outlook. On April 22, a terror attack in Pahalgam, Jammu & Kashmir, resulted in 26 tourist killings.
Moody’s has maintained its growth prediction for India at 6.5% for 2026, following a projected 6.7% growth in 2024.
The Global Macro Outlook 2025-26 (May Update) by Moody's indicates a widespread global economic deceleration influenced by increased US policy uncertainty, trade conflicts and unstable financial markets. The organisation observed that international investors and corporations are adjusting their approaches due to evolving geopolitical circumstances, potentially increasing operational costs and affecting investment decisions.
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Big achievement! India to become 4th largest economy in 2025 overtaking Japan; will be 3rd largest by 2028Geopolitical challenges, specifically in South Asia, are developing into possible impediments to India's economic advancement. The latest escalation in India-Pakistan relations has become an additional concern for Moody's assessment.
The rating agency anticipates that the RBI will implement additional reductions to benchmark policy rates in 2025 to bolster domestic economic growth.
In its global outlook, Moody's has revised downwards its US GDP growth forecast to 1% for 2025 (reduced from 2%) and 1.5% for 2026. Similarly, China's economic expansion is predicted to slow to 3.8% in 2025 and 3.9% in 2026, down from 5% in 2024.
"Economic growth was already set to slow this year back to its potential rate," Moody's said. "We lowered our global growth projections for 2025 and 2026 further on account of the policy shifts and more intense policy uncertainty than we had previously expected, especially in the largest two economies, the US and China."
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Big economic setback! Pakistan economy has more to lose than India - Moody's warning amid ongoing tensionsDespite potential tariff reductions, the agency cautions that policy uncertainties and persistent trade disagreements, particularly between the US and China, are likely to affect global trade and investment, with implications for G-20 nations, including India.
Additional risk factors include ongoing conflicts in Ukraine and the Middle East, heightened South China Sea tensions, and instability in financial markets. Moody's indicates these factors could restrict liquidity availability and increase capital expenses, potentially destabilising economic conditions further.
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