India's economy to grow at 6.5% through 2027 despite Trump tariffs: Moody's
News Summary
Moody's Ratings, in its Global Macro Outlook 2026-27 report, projects India's economy to grow at 6.5% through 2027, maintaining its position as the fastest-growing among G-20 nations. Despite high US tariffs of 50% on certain exports, India's growth momentum is expected to be supported by robust infrastructure investment, strong consumer demand, and export diversification. Moody's noted that Indian exporters have successfully redirected exports, with overall exports climbing 6.75% in September even as shipments to the US dropped 11.9%. India's stability is attributed to a neutral-to-easy monetary policy stance by the RBI, low inflation, and strong international capital inflows. However, while domestic demand remains the primary growth engine, private sector capital spending remains cautious. Globally, Moody's projects GDP growth at 2.5%-2.6% in 2026-27, with emerging markets, led by India, expanding close to 4%. The US is experiencing slower but stable momentum, supported by consumer spending and AI investment. Europe shows modest improvement driven by employment gains, wage stability, and ECB easing, alongside infrastructure investments. China's economy is on track to grow 5% in 2025, but with soft domestic fundamentals, and is expected to slow to 4.2% by 2027.
Background
The current global economy faces multiple challenges, including geopolitical tensions, ongoing supply chain realignments, and diverging monetary policies among major economies. Against this backdrop, trade protectionism is on the rise, particularly following President Trump's re-election, with his administration continuing to pursue "America First" trade policies, including imposing tariffs on specific countries and products. India, as the world's most populous nation and a major emerging economy, its economic performance is crucial to the global growth landscape. This article reports on Moody's latest assessment of India's economic outlook, highlighting its resilience in navigating global headwinds and US tariffs, and contrasts its expected performance with other major economies such as the US, Europe, and China.
In-Depth AI Insights
Is India's economic resilience amidst Trump tariffs sustainable, and what are its true underlying drivers? - Moody's report highlights India's ability to withstand external shocks through export diversification and domestic demand. This suggests a potential structural transformation in the Indian economy, reducing its reliance on single markets and enhancing its resilience against trade protectionism. - However, the report also notes cautious private sector capital spending, which could be a latent structural vulnerability. If domestic investment fails to fully recover, long-term growth momentum could be impacted, especially after infrastructure and consumer demand reach certain saturation points. - This resilience may be partly attributed to India's strategic position in global supply chain restructuring, where some multinational corporations might be re-evaluating their production bases, seeing India as an alternative to China, thus attracting investment and export orders. How might India's "export redirection" strategy influence its long-term trade relations and geopolitical positioning? - India's successful redirection of exports away from the US to other markets is not merely an economic adaptation but may also signal a geostrategic intent to diversify its trade partnerships. This helps reduce dependence on any single major economy, enhancing its autonomy in the global trade system. - Such a strategy could lead India to deepen trade ties with regions like Southeast Asia, the Middle East, Africa, and even Europe, fostering a more distributed and resilient trade network. In the long run, this could solidify India's position as a leader in the "Global South" and enable it to play a larger role in multilateral trade frameworks. - However, export redirection could also bring new challenges, such as increased competition with new trade partners and ensuring these emerging markets can offer comparable scale and profitability to the US market. Given the cautious private sector investment, can India sustain its high growth trajectory? - The report identifies infrastructure investment and strong consumer demand as current growth pillars. However, without substantial private sector business investments, particularly in manufacturing and service sector capacity expansion, the quality and sustainability of growth could be constrained. - This caution may reflect private sector uncertainties regarding future policy stability, the business environment, or the global economic outlook. While government stimulus and public investment can provide short-term support, long-term economic dynamism ultimately requires deep private capital participation. - Investors should monitor how the Indian government addresses private sector confidence through policy reforms (e.g., regulatory simplification, land reforms, labor market flexibility) to catalyze a broader investment cycle, ensuring growth is not just quantitative but qualitative.