Why US Tariffs Won't Hurt India Much — Thanks To These Key Factors
India well-positioned to deal with negative effects of US tariffs: Moody’s
Furthermore, easing inflation will allow the Central bank to go for interest rate cuts, which would further support the economy.
“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.
What About India-Pakistan Tensions
The report also pointed out that if the escalation continues, the impact would be felt more on Pakistan’s side as India’s major hubs are far away from the conflict zone.
“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.
While increased defence spending could weigh on India’s fiscal strength and slow its path to fiscal consolidation, other economic drivers remain strong. The central government’s focus on infrastructure investment continues to support GDP growth, and recent personal income tax cuts are expected to boost consumer spending.
Why Tariffs Won’t Hurt India Much
India’s limited dependence on goods trade, combined with a strong services sector, helps cushion the economy against external shocks like US tariffs. However, export-oriented industries such as automobiles may still feel the impact of global trade disruptions, despite having diversified operations.
Earlier this month, Moody’s revised India’s 2025 economic growth forecast down from 6.7% to 6.3%, citing global uncertainties. Still, this remains the highest growth projection among G-20 economies.
In April, the US government announced a broad set of country-specific tariffs but delayed their implementation by 90 days. The base tariff of 10% remains in place, with some exemptions, while sectors like steel and aluminium continue to face elevated duties.