India's GDP growth to slow to 6.4% as Trump tariff threat looms large, says Moody's Analytics

India's economy, which has been on a steady growth trajectory in recent years, is now expected to face a slowdown.

According to a report by Moody’s Analytics, India’s GDP growth is forecasted to slow to 6.4% in 2025, a notable dip from the country's recent performance and below the RBI's expectations.

The slowdown is being attributed to several factors, including global economic headwinds and regional uncertainties that threaten India’s economic expansion.

How Trump tariffs could hurt India

One major factor contributing to the slowdown is the trade dynamics in the Asia Pacific (APAC) region, which are increasingly affected by the shifting landscape of global tariffs, particularly those introduced by the U.S. under former President Donald Trump's administration.

According to the report, tariffs imposed by the U.S. are expected to significantly affect the APAC region, especially given its heavy reliance on trade.

The economies of Northeast and Southeast Asia have long depended on exports as a primary driver of growth—exports that often make their way to the U.S. market.

The report states, "Economies in Northeast and Southeast Asia, in particular, have long relied on exports as a main driver of growth–exports that, one way or the other, end up in the U.S."

If imposed, U.S. tariffs would make exports less viable, many countries in the APAC region, including India, will likely feel the pinch.

As the global trade landscape shifts, with U.S. tariffs discouraging imports, the impact on India could be multifaceted.

Furthermore, the report draws attention to the broader impact of the trade tensions between the U.S. and China, especially in the context of the potential tariff war between the two economic giants.

Previously, the U.S.-China trade dispute has disrupted global supply chains and created uncertainty, and there is a risk that continued friction will spill over into other countries.

For instance, if China responds to U.S. tariffs by ramping up its manufacturing capabilities and aggressively slashing prices to stay competitive, it could prompt retaliation, Moddy's Analytics warned.

"While our baseline view is that higher tariffs will spur China to provide needed policy support for the household sector, past attempts at rebalancing China’s economy towards greater reliance on domestic consumption have yielded mixed results at best," the report notes.