Moody’s Analytics has revised India’s gross domestic product (GDP) forecast for calendar year 2025 (CY25) downward by 30 basis points (bps) to 6.1 per cent. The downgrade was 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 said.

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It acknowledged the 90-day freeze on most tariffs and the 10 per cent blanket in place, and said that its April baseline represents the economic toll should the tariffs eventually go ahead in full.

The overall growth will 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 (RBI) 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.

Notably, at the Monetary Policy Committee (MPC) meet, the RBI projected India’s GDP growth for 2025-26 at 6.5 per cent amid the trade jitters due to the US tariffs.Governor Sanjay Malhotra announced that the real GDP growth for 2025-26 is now projected at 6.5 per cent, with Q1 at 6.5 per cent; Q2 at 6.7 per cent; Q3 at 6.6 per cent; and Q4 at 6.3per cent.

The GDP projection is on the back of sustained demand from rural areas and revival in urban consumption amid a changing global economic outlook after the recent trade tariff-related measures exacerbated uncertainties clouding the economic outlook across regions.