Moody’s Ratings, on April 2, projected India’s GDP growth at 6.5% for the 2025-26 fiscal year, reaffirming its status as the fastest-growing economy among the advanced and emerging G-20 nations.
The report highlights how tax relief measures and continued monetary easing drive India’s economic resilience, fueling domestic consumption and investment.
The agency anticipates a slight moderation in growth from 6.7% in 2024-25 to 6.5% in the following fiscal year.
However, India’s expansion remains robust compared to other major economies.
Moody’s report on emerging markets states that global economic uncertainties, particularly in US policies, could impact capital flows and trade, but large emerging markets (EMs) like India have the resources to navigate these challenges.
Fiscal & Monetary Policies Boost Growth
Moody’s attributes India’s strong economic trajectory to government initiatives such as increased income tax rebates and interest rate cuts.
The Union Budget for 2025-26 raised the income tax rebate threshold from ₹7 lakh to ₹12 lakh, providing tax relief worth ₹1 lakh crore to the middle class.
This move is expected to boost household consumption and spending power.
Additionally, in February, the Reserve Bank of India (RBI) reduced interest rates by 25 basis points to 6.25%, with expectations of another rate cut in the upcoming monetary policy review on April 9.
These measures are designed to support economic expansion while maintaining financial stability.
Inflation & External Vulnerability
Moody’s estimates that India’s inflation will average 4.5% in the current fiscal year, down from 4.9% in the previous year.
This moderation, coupled with proactive monetary policies, enhances India’s appeal as an investment destination.
The report also highlights India’s low external vulnerability indicator of 61%, underscoring its ability to withstand external financial shocks.
India’s high proportion of domestic currency-denominated external debt further shields it from exchange rate fluctuations, unlike economies with a large share of foreign currency debt, such as Argentina and Colombia.
India’s Position Amid Global Economic Uncertainty
Moody’s affirms that India and Brazil will attract and retain investment despite concerns over US policy shifts affecting global capital flows, thanks to their large, domestically driven economies and deep capital markets.
These attributes provide financial buffers against global uncertainties and instill investor confidence.
Moody’s expects growth in emerging markets to slow in 2025-26 but emphasizes that India’s strong economic fundamentals will sustain its growth momentum.
However, smaller and more open economies remain vulnerable to currency volatility and investor sentiment fluctuations.
As global economic landscapes shift, India’s strategic policy measures, robust domestic demand, and financial stability will continue to drive its growth trajectory.
The nation’s ability to balance fiscal incentives, monetary policies, and capital inflows makes it a key player in the evolving global economy.
Moody’s reaffirms India’s economic strength, positioning the country as a top performer among emerging and advanced economies in the years ahead.
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