New Delhi, August 8, 2025 — Moody’s Ratings has warned that India’s GDP growth could decelerate to 6% in FY26 if the United States enforces a 50% tariff on Indian exports, effective August 27. The rating agency projects a 30 basis point reduction from its earlier forecast of 6.3%, citing trade disruptions and external pressures stemming from the tariff escalation.
The US administration recently announced an additional 25% duty on Indian goods, doubling the existing rate to 50%. The move is reportedly in response to India’s continued import of Russian crude oil, despite Western sanctions. The White House stated that the tariff hike aims to pressure India into aligning with broader geopolitical trade norms.
Moody’s noted that while resilient domestic demand and a robust services sector may cushion the impact, the broader economic implications will depend on India’s policy response. The agency highlighted potential risks to inflation, the current account deficit, and investment flows, particularly in high-value manufacturing sectors such as electronics.
India’s imports of Russian crude surged to $56.8 billion in 2024, up from $2.8 billion in 2021, helping to moderate domestic inflation and shield the economy from global commodity price shocks. However, the tariff disparity—India facing 50% duties compared to 15–20% for other Asia-Pacific nations—could undermine its competitiveness and long-term manufacturing ambitions.
Negotiations between India and the US on a Bilateral Trade Agreement (BTA) are ongoing, with the sixth round of talks scheduled for August 25. Both sides aim to finalize an interim deal by October–November, targeting a doubling of bilateral trade to $500 billion by 2030.
Moody’s concluded that India retains adequate foreign exchange reserves to manage short-term volatility and expects the government to maintain its fiscal consolidation path despite external challenges.
