Mumbai:
Moody’s Analytics has dropped India’s development forecast for 30 basis points for 2025 from baseline IT forecast in March, after the latest announcement of US tariffs.
“Although US President Donald Trump has announced a 90-day freeze on most rigid tariffs declared a week ago and implemented 10% blanket tariffs in his place, April Baseline represents Baseline Economic Toll, which they should eventually move forward completely,” Moody’s analytics said in a note.
One of India’s largest trading partners, the US slapped 26% tariffs on the country last week, but President Trump stopped most of the heavy duties declared in the previous week.
Gems and jewelery, medical equipment and textile industries will be one of the worst hits, Moody’s said.
However, overall development is likely to be relatively untouched because external demand only makes a relatively small part of India’s GDP, the couple.
The Reserve Bank of India (RBI) reduced its major repo rate for the second consecutive time on Wednesday and converted its monetary policy stance into “adjustment”, further cut room signaling room, as it wants to promote a dull economy in the face of fresh US tariffs.
Central bank governor Sanjay Malhotra said in his monetary policy statement that Tariff has increased uncertainties, but it is difficult to reduce the impact on development.
Moody’s Analytics hopes that RBI will have to cut the repo rate by 5.75% by the end of 2025. With encouragement by declaring early this year, it should help promote the domestic economy and reduce tariff shock on overall development relative to other weak economies.
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