Moody’s warns U.S. tariffs might harm India’s manufacturing push, gradual development

U.S. President Donald Trump’s steep 50% tariffs on Indian imports might severely undermine India’s manufacturing ambitions and gradual financial development, Moody’s Ratings mentioned on Friday (August 8, 2025).

Mr. Trump imposed a further 25% tariff on Indian items on Wednesday (August 6, 2025), citing India’s continued purchases of Russian oil, taking the overall tariff to 50%— far increased than these levied on different Asia-Pacific international locations.

Moody’s mentioned India’s actual GDP development might gradual by round 0.3 proportion factors from its present forecast of 6.3% for the fiscal 12 months ending March 2026.

“Beyond 2025, the much wider tariff gap compared with other Asia-Pacific countries would severely curtail India’s ambitions to develop its manufacturing sector, particularly in higher value-added sectors such as electronics, and may even reverse some of the gains made in recent years in attracting related investments,” the rankings company mentioned.

Reducing Russian oil imports to keep away from penalty tariffs might additionally make it tougher for India to safe various crude provides in enough portions, Moody’s mentioned.

A bigger import invoice would widen the present account deficit, particularly amid weaker tariff competitiveness that would deter funding inflows.

“We expect there will likely be a negotiated solution that falls between the two scenarios described above,” Moody’s mentioned.

“The magnitude of the drag on growth from tariff obstacles will influence the government’s decision to pursue a fiscal policy response, although we anticipate the government will adhere to its focus on gradual fiscal and debt consolidation.”

The Reserve Bank of India (RBI) saved its key charges unchanged as anticipated on Wednesday and retained its “neutral” coverage stance following a shock 50-basis-point price reduce in June.

Global commerce uncertainties, fueled by the U.S. tariffs, have additionally unsettled overseas traders. Foreign portfolio traders have bought $900 million value of Indian equities up to now in August, after $2 billion in outflows in July.

India’s benchmark fairness indices— the Nifty 50 and the Sensex — fell 2.9% in July and are down 0.7% up to now in August, as investor nervousness rises amid escalating commerce tensions.