“Although U.S. President Donald Trump has just declared a 90-day freeze on most of the harsh tariffs announced a week ago and applied a 10% blanket tariff in their place, the April baseline represents the economic toll they will have should they eventually go ahead in full,” Moody’s Analytics said in a note.
The U.S., one of India’s largest trading partners, slapped 26% tariffs on the country last week, but President Trump paused most of the hefty duties he had announced in the previous week.
Gems and jewellery, medical devices and textile industries will be among the worst hit, said Moody’s.
However, overall growth is likely to be relatively insulated since external demand only makes up a relatively small portion of India’s gross domestic product, it added.
The Reserve Bank of India (RBI) lowered its key repo rate on Wednesday for a second consecutive time and changed its monetary policy stance to “accommodative”, signalling room for more cuts ahead, as it seeks to boost the sluggish economy in the face of fresh U.S. tariffs. The tariffs have exacerbated uncertainties, but quantifying the impact on growth is difficult, central bank Governor Sanjay Malhotra had said in his monetary policy statement. Moody’s Analytics expects the RBI to cut the repo rate to 5.75% by the end of 2025. That, along with the tax incentives announced earlier this year, should help boost the domestic economy and dampen the tariff shock on overall growth relative to other vulnerable economies, it said.
Content Source: economictimes.indiatimes.com