Moody’s Analytics on Thursday revised its India gross domestic product (GDP) forecast for calendar year 2025 (CY25) downward by 30 basis points (bps) to 6.1 per cent due to tariff threats from the US hitting gems and jewellery, medical devices, and textile industries.
“The US is one of India’s largest trading partners, so a 26 per cent tariff hovering over imports of Indian goods will heavily impede the trade balance,” Moody’s Analytics, a division of Moody’s Ratings said.
Acknowledging the 90-day freeze on most tariffs and the 10 per cent blanket in their place, Moody’s Analytics said that its April baseline represents the economic toll should the tariffs eventually go ahead in full.
In the context of India, Moody’s Analytics expects the overall growth to be relatively insulated from the shock since external demand makes up a relatively small portion of GDP.
Given the ease in headline inflation, Moody’s Analytics expects the Reserve Bank of India to lower interest rates, most likely in the form of 25 bps cuts that take the policy rate to 5.75 per cent by the end of CY25.
“This, paired with tax incentives announced earlier this year, should help boost the domestic economy and dampen the shock of the tariffs on overall growth relative to other vulnerable economies,” it stated.
Moody’s Analytics added that uncertainty is palpable, with tumbling and volatile equity markets headlining financial market turbulence. “Households won’t want to spend more when the environment is so uncertain, regardless of stronger purchasing power, and businesses will hold back on additional investment as they navigate (the) chaos.”
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India wants to move quickly on a trade deal with the United States, a government official said on Thursday, after President Donald Trump's decision to pause reciprocal tariffs on dozens of countries, while hiking levies on China.
India and the United States agreed in February to work on the first phase of a trade deal to be concluded late this year, with a view to reaching two-way trade worth $500 billion by 2030.
"India is one of the first nations to start talks over a deal with the United States and to have jointly agreed to a deadline to conclude it," said the official, who spoke on condition of anonymity because of the sensitivity of the issue.
India's trade ministry, which is leading the talks with the United States, did not immediately respond to an e-mail seeking comment.
The Indian trade minister said at an event in New Delhi earlier this week that manufacturers in India and the US have suffered from China's unfair trade practices over the years.
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India will raise scrutiny on imports to spot any potential dumping of goods, including from China, the official said
On Wednesday, Trump temporarily lowered duties on trading partners including India, just 24 hours after imposing tariffs that unleashed the most intense market volatility since the early days of the Covid-19 pandemic.
Shifting the focus back to a bilateral trade war with China, Trump said he would raise to 125 per cent the tariff on imports from China. The US reciprocal tariff on India stands at 10 per cent.
The decision to halt further tariffs is especially a relief for Indian shrimp exporters, the official said, citing an industry that faced a tariff disadvantage compared to competitors like Ecuador.
Nearly $14 billion worth of electronics products and over $9 billion worth of gems and jewellery were also among the sectors impacted by the US tariffs.
Ajay Sahai, director general at the Federation of India Export Organisations, representing more than 37,000 exporters, said the 90-day pause gives Indian negotiators time to work on concluding a bilateral trade deal with the United States.
"The US appears determined to hit China hard, and if it wants to ensure a non-disruptive supply of goods to its consumers while keeping inflation in check, India remains one of the most reliable suppliers," Sahai said.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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