India's Economy Expected to Maintain Robust Growth Despite Global Challenges
India's economic growth is projected to remain robust at 6.5% in the fiscal year 2025-26, according to Moody's Ratings, placing it ahead of all advanced and emerging G-20 nations. This sustained momentum will primarily be supported by recent tax relief measures and continued monetary policy easing, which collectively boost domestic economic activity.
Tax Relief and Monetary Policy to Drive Growth
Moody's highlighted that the Indian government's recent budget announcement significantly raised the income tax rebate limit from ₹7 lakh to ₹12 lakh, providing substantial relief worth ₹1 lakh crore to the middle class. Additionally, the Reserve Bank of India's (RBI) decision to cut interest rates by 25 basis points to 6.25% in February has further stimulated the economy. Market analysts widely anticipate another rate cut by RBI in its upcoming monetary policy review scheduled for April 9, adding optimism to India's growth prospects.
Inflation Likely to Remain Moderate
Inflation in India is projected to average 4.5% for the fiscal year 2025-26, down from 4.9% in the previous year. Moody's suggests that such moderate inflationary pressures, combined with monetary easing, will create a favorable environment for consumer spending and investment.
India's Economic Resilience Amid Global Uncertainty
Despite potential volatility stemming from U.S. policies affecting global capital flows, supply chains, and geopolitics, Moody's emphasized India's strong capability to attract and retain foreign capital. Large emerging markets like India and Brazil are less susceptible to cross-border financial outflows due to their domestically oriented economies, deep financial markets, credible economic policies, and substantial foreign exchange reserves.
Moody's specifically noted India's low external vulnerability indicator at 61%, demonstrating its robust position to withstand external economic shocks. Additionally, India's substantial proportion of domestic currency-denominated external debt provides further insulation from potential exchange rate fluctuations, reassuring global investors.
Growth Outlook for Emerging Markets Mixed
The report highlighted that, overall, emerging market economies will witness slightly slower growth in the 2025-26 fiscal year, although economic performance will vary significantly between countries. Asia-Pacific economies, while showing relatively strong growth, remain vulnerable to disruptions in global trade, particularly due to U.S. tariffs.
Larger, domestically driven emerging markets like India and Brazil are identified as better equipped to navigate global turbulence. Conversely, smaller economies with higher exposure to external debts in foreign currency, such as Argentina and Colombia, may experience increased volatility and financial instability.
In conclusion, Moody's assessment underscores India's strong economic position, backed by effective fiscal and monetary strategies, positioning it favorably to maintain its growth momentum amid global economic uncertainties.
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