(Reuters) -U.S. President Donald Trump’s steep 50% tariffs on Indian imports could severely undermine India’s manufacturing ambitions and slow economic growth, Moody’s Ratings said on Friday.
Trump imposed an additional 25% tariff on Indian goods on Wednesday, citing New Delhi’s continued purchases of Russian oil, taking the total tariff to 50% — far higher than those levied on other Asia-Pacific countries.
Moody’s said India’s real GDP growth may slow by around 0.3 percentage points from its current forecast of 6.3% for the fiscal year 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 ratings agency said.
Reducing Russian oil imports to avoid penalty tariffs could also make it harder for India to secure alternative crude supplies in sufficient quantities, Moody’s said.
A larger import bill would widen the current account deficit, especially amid weaker tariff competitiveness that could deter investment inflows.
“We expect there will likely be a negotiated solution that falls between the two scenarios described above,” Moody’s said.
“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) kept its key rates unchanged as expected on Wednesday and retained its “neutral” policy stance following a surprise 50-basis-point rate cut in June.
Global trade uncertainties, fueled by the U.S. tariffs, have also unsettled foreign investors. Foreign portfolio investors have sold $900 million worth of Indian equities so far in August, after $2 billion in outflows in July.
India’s benchmark equity indices — the Nifty 50 and the Sensex — fell 2.9% in July and are down 0.7% so far in August, as investor anxiety rises amid escalating trade tensions.
(Reporting by Kashish Tandon in Bengaluru and Swati Bhat in Mumbai; Editing by Sumana Nandy and Stephen Coates)
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