India’s strong domestic market cushions economy against global trade shocks — Report
India is in a stronger position than other countries to withstand global trade disruptions, in the wake of the US tariff turmoil
- NEW DELHI — India is in a stronger position than other countries to withstand
global trade disruptions, in the wake of the US tariff turmoil, due to the
large size of its domestic market and the country’s low dependence on goods
exports, according to a Moody’s report released on Wednesday.
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- The report points out that the government initiatives,
such as increasing infrastructure investment, steps taken to boost private
consumption, will help shield India’s economy from weakening global demand.
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- “India’s large domestic economy and limited exposure to
global goods trade puts it in a stronger position to absorb external shocks,”
the report said.
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- Some sectors -- like automobiles, which export to the US
-- may encounter global headwinds, despite their diversified operations. But
India’s robust services sector and large domestic economy provide strong
buffers, according to the report.
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- The report also states that declining inflation is
expected to pave the way for a soft monetary policy with interest rate cuts to
spur growth. The banking sector also has sufficient liquidity to support credit
growth, according to the report.
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- The Moody’s report also observes that the recent
India-Pakistan tensions are more likely to weigh on Pakistan’s economy than
India’s. The key economic hubs in India are far from the conflict zones, and
bilateral economic ties remain limited.
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- However, a prolonged escalation could lead to increased
defence spending, which might slow fiscal consolidation efforts and impact
government finances, the report added.
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- Moody’s Ratings had earlier this month pegged India's GDP
growth at 6.3 per cent for 2025 and expects the economy to pick up momentum in
2026 to record a 6.5 per cent growth rate.
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- The forecast is in line with the IMF outlook, which sees
India as the only major economy in the world to record an over 6 per cent
growth rate in 2025.
