Moody’s Warns U.S. Tariffs Could Dent India’s Growth and Manufacturing Push.......

Moody’s Ratings warned on Friday that U.S. President Donald Trump’s decision to impose steep 50% tariffs on Indian imports could severely hurt India’s manufacturing ambitions and slow economic growth. The additional 25% tariff, announced on Wednesday—citing India’s continued purchases of Russian oil—takes the total levy to 50%, far exceeding those on other Asia-Pacific nations. The ratings agency projected India’s real GDP growth for FY26 could drop by 0.3 percentage points from its current forecast of 6.3%. Moody’s highlighted that the widened tariff gap could stifle India’s efforts to boost manufacturing, particularly in high-value sectors like electronics, and potentially reverse recent gains in foreign investment.

The report also noted that reducing Russian oil imports to avoid penalties may disrupt India’s crude supply chains, increasing import costs and widening the current account deficit. Weaker tariff competitiveness could further deter investment inflows, exacerbating economic challenges. However, Moody’s expects a negotiated compromise to emerge. While the government may consider fiscal measures to counter growth headwinds, it is likely to maintain its focus on gradual fiscal consolidation.

The Reserve Bank of India (RBI) held key rates steady this week, retaining a "neutral" stance after June’s surprise 50-basis-point rate cut. Meanwhile, global trade uncertainties have spooked foreign investors, who pulled $2 billion from Indian equities in July and another $900 million so far in August. Reflecting the anxiety, India’s benchmark Nifty 50 and Sensex fell 2.9% in July and are down 0.7% this month. As trade tensions escalate, India faces mounting pressure to balance economic resilience with its strategic and industrial ambitions.