Moody’s: India Well-Positioned To Weather US Tariffs And Pakistan Tensions

Moody’s Ratings on Monday (May 19, 2025) painted a relatively optimistic picture of India’s economic resilience.

The global ratings agency stated that India can handle the impact of proposed US tariffs effectively and will likely avoid significant fallout from rising tensions with Pakistan.

US Tariffs Pose Limited Threat To India

Moody’s states that India is better placed than many other emerging markets to navigate US tariff increases and global trade disruptions.

This advantage stems from strong domestic growth drivers, a large internal market, and limited reliance on goods exports.

Although Moody’s warned that US President Donald Trump’s tariff strategy could slow global growth, which would also affect India, the agency said India’s smaller export-to-GDP ratio could cushion the blow.

“India’s low dependence on goods exports, despite the US being its largest export destination, limits the effect of new tariffs on overall economic growth,” the report stated.

India’s Exports May Gain From Tariff Shift

Moody’s also highlighted that Indian goods could benefit from increased US demand if trade negotiations result in India facing lower tariffs compared to other emerging markets.

This shift could open opportunities for Indian exporters in the global supply chain.

India’s growing service exports continue to offer trade resilience amid global uncertainties, the report noted.

Tariffs and global trade tensions do not directly affect service exports.

However, Moody’s warned that Indian service providers could face challenges due to potential changes in US immigration policy.

“Stricter immigration rules could shrink the labour pool and disrupt operations, especially for firms relying on H1B visa holders,” the agency stated.

India’s Economy Unlikely To Be Disrupted By Pakistan Tensions

Moody’s also addressed the recent rise in tensions between India and Pakistan.

The agency asserted that ongoing regional tensions are unlikely to significantly disrupt India’s economic activity.

India’s limited economic ties with Pakistan and the geographical distance between conflict zones and major production centres offer a buffer.

“However, an increase in defence spending in response to military tensions could pressure India’s fiscal strength and slow fiscal consolidation,” Moody’s cautioned.

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