India Well-Positioned To Withstand U.S. Tariffs & Global Trade Disruptions: Moody's

(MENAFN- KNN India) New Delhi, May 21 (KNN) Moody's Ratings announced on Wednesday that India is better equipped than many other emerging markets to handle US tariffs and global trade disruptions, according to their latest assessment.

The report identifies several key factors contributing to India's resilience against global economic headwinds.

These include robust internal growth drivers, a sizable domestic economy, and low dependence on goods trade.

Moody's highlighted that "Significant government investments will bolster sectors from infrastructure to manufacturing, at a time that rapid urbanisation and a young population is underpinning structural demand for housing and consumer goods."

This positive assessment comes at a notable time when most research agencies and India's central bank have lowered growth projections for the current fiscal year.

Despite these revised forecasts, Moody's suggests that decreasing inflation may provide room for interest rate cuts to further stimulate growth.

The report also indicates that Indian exports might benefit from preferential treatment in US markets if trade negotiations result in lower tariffs compared to other emerging economies, similar to the reciprocal tariff schedule announced on April 2.

However, Moody's noted that certain sectors with US export exposure, such as automotive, still face challenges despite their diversified operations.

Taking note of recent policy changes, the report acknowledged the positive impact of income tax rate cuts implemented from April 1, 2025, which are expected to strengthen domestic consumption.

The agency emphasised that India's economic growth remains primarily driven by domestic demand, with the central government's infrastructure spending providing crucial support to GDP expansion.

Moody's also highlighted India's limited reliance on goods trade and its robust service sector as mitigating factors against potential US tariff impacts.

The report specifically mentioned the government's recent Rs 22,900 crore (USD 2.7 billion) initiative under the Production Linked Incentive (PLI) scheme to promote domestic manufacturing of "passive" electronic components, aimed at reducing dependence on imports and supporting the development of India's semiconductor industry.

While noting that the PLI scheme has shown mixed results since its 2020 inception, Moody's suggested that successful implementation of the new program could boost domestic value addition in the electronics sector and address stagnation in manufacturing's contribution to GDP and employment.

The report cited Apple Inc.'s increased manufacturing presence in India as a significant example of the country's growing importance in global supply chains.

While acknowledging that interest rate cuts might constrain banks' interest margins, the report suggested that non-interest income would likely be strengthened by increased business volumes and bond gains.

(KNN Bureau)

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