India is in a strong position to withstand the adverse impact of US tariffs and global trade disruptions, thanks to robust domestic growth drivers and minimal reliance on exports
India’s economy remains relatively insulated from US tariffs due to its limited dependence on goods trade. Representational Image
Moody's Ratings, a finance servicing company on Wednesday stated that India is in a strong position to withstand the adverse impact of US tariffs and global trade disruptions, thanks to robust domestic growth drivers and minimal reliance on exports. In a report on India, the agency noted that government efforts to stimulate private consumption, enhance manufacturing, and boost infrastructure investment will help counterbalance the slowdown in global demand. Additionally, easing inflation could pave the way for interest rate cuts, providing further economic support, while the banking sector’s ample liquidity continues to enable lending.
"India is better positioned than many other emerging markets to deal with US tariffs and global trade disruptions, helped by robust internal growth drivers, a sizable domestic economy and a low dependence on goods trade," Moody's said.
Moreover, the ongoing tensions between Pakistan and India, including the recent escalation in early May, are likely to have a greater negative impact on Pakistan's economic growth than on India's, reported by PTI.
"In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India's economic activity because it has minimal economic relations with Pakistan. Moreover, the parts of India that produce most of its agricultural and industrial output are geographically distant from the conflict zones," Moody's said.
However, increased defense spending could strain India’s fiscal position and slow progress on fiscal consolidation. At the same time, central government investments in infrastructure continue to support GDP growth, while reductions in personal income tax help boost consumer spending.
India’s economy remains relatively insulated from US tariffs due to its limited dependence on goods trade and the strength of its services sector. Still, certain industries like automobiles, which do export to the US, face headwinds from global trade disruptions, even though they benefit from diversified markets.
Earlier this month, Moody’s revised India’s 2025 calendar year growth forecast downward from 6.7% to 6.3%. Despite the downgrade, India is still expected to post the fastest growth among G-20 economies.
In early April, the US administration announced broad, country-specific tariffs but delayed their implementation by 90 days. While a base tariff of 10% remains, some sectors received exemptions, and others, including steel and aluminum, continue to face elevated tariffs imposed earlier.
(With inputs from PTI)
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