Moody’s Says Strong Domestic Demand to Cushion Tariff Impact
Global ratings agency Moody’s has said that India’s resilient domestic demand will help soften the economic impact of recently imposed U.S. tariffs. In its latest assessment, Moody’s noted that while the new trade penalties could slow growth slightly, the overall outlook for the Indian economy remains steady.
Limited Growth Slowdown
Moody’s projects that India’s real GDP growth for fiscal 2025-26, which ends in March 2026, may slow by about 0.3 percentage points from its earlier forecast of 6.3 percent. This modest downward revision reflects the expected drag from higher trade barriers, which will mainly affect certain export-dependent sectors.
Services Sector to Play Key Role
The agency highlighted that India’s services sector, particularly IT, financial services, and tourism, will continue to provide strong support to the economy. Along with robust domestic consumption, these factors are expected to offset much of the strain caused by the tariffs. Moody’s also pointed to ongoing government spending on infrastructure as an additional cushion for growth.
Resilient Domestic Market
India’s large consumer base and steady household spending have historically provided a buffer against external shocks. Moody’s said this trend remains intact, with rising incomes, urbanization, and expanding credit availability keeping consumption strong. As a result, the agency believes the overall impact of the tariff penalties will be contained.
Outlook Remains Positive
Despite the tariff challenge, Moody’s has not altered India’s sovereign rating or outlook. It expects growth to remain among the highest for major economies in the coming years, supported by structural reforms and investment inflows.
