India's growth to be highest amongst advanced, emerging G20 nations: Moody's

Moody's Ratings has stated that India's economic growth is expected to remain the highest among both advanced and emerging G20 nations, supported by tax measures and continued monetary easing. According to the rating agency, India's economy is projected to expand by 6.5% in the current fiscal year, maintaining its strong position despite global economic uncertainties. In its latest report on emerging markets, Moody's highlighted that these economies are navigating "choppy waters" due to the ongoing shifts in U.S. policies, which are likely to reshape global capital flows, supply chains, trade dynamics, and geopolitical landscapes. However, large emerging markets, including India and Brazil, reportedly possess the resources to withstand these pressures and continue attracting global investments.
The report further indicated that economic activity in the fastest- growing economies is expected to slow slightly from high levels but will remain robust in 2024 and 2025. For China, growth will continue to be driven by exports, infrastructure investment, and high-tech sectors, whereas domestic consumption remains weak. Moody's has projected India's GDP growth to moderate slightly to 6.5% in the 2025-26 fiscal year, down from an estimated 6.7% in 2024-25. Additionally, inflation is expected to average 4.5% in the current fiscal year, lower than the 4.9% recorded in the previous fiscal.
The report also pointed to significant policy measures undertaken by the Indian government. The Union Budget for 2025-26 introduced an increase in the income tax rebate limit from Rs 7 lakh to Rs 12 lakh, providing an estimated tax relief of Rs 1 lakh crore to the middle class. Furthermore, the Reserve Bank of India (RBI) implemented a 25-basis-point rate cut in February, bringing the repo rate down to 6.25%. Market participants anticipate another rate cut when the RBI’s Monetary Policy Committee (MPC) meets on April 9.
Addressing concerns over capital outflows, Moody’s reportedly stated that while U.S. policy uncertainty could pose risks, India and Brazil are better positioned than other emerging markets to attract and retain global capital. This is attributed to their large, domestically driven economies, deep domestic capital markets, moderate policy credibility, and substantial foreign exchange reserves. These factors serve as buffers against external financial pressures and enhance investor confidence in the Indian economy.
Moody’s emphasized that India has a low external vulnerability indicator of 61%, indicating a relatively lower susceptibility to external financial shocks. The country also has a higher proportion of external debt denominated in domestic currency, which provides insulation against exchange rate fluctuations.
The agency further projected that while overall emerging market growth will slow in the 2025-26 fiscal year, Asia-Pacific economies will continue to lead global growth. However, their strong integration with global trade makes them more vulnerable to potential disruptions, such as U.S. tariffs.
Large, diversified, and domestically driven emerging markets like India and Brazil are expected to remain attractive investment destinations, Moody’s reportedly noted. By contrast, smaller and more open economies are likely to face greater exposure to currency volatility and investor sentiment fluctuations. Countries with a higher share of foreign currency- denominated debt, such as Argentina and Colombia, remain particularly vulnerable, the report added.

(Business Correspondent)