India Is Well-Positioned to Weather U.S. Tariff Pressures, Says Moody’s

According to a fresh report from Moody’s Ratings, India is in a solid position to handle the latest round of U.S. tariffs and global trade tensions. The international credit agency pointed to three key strengths: strong demand at home, minimal dependence on exports, and flexible policies that can help cushion global shocks.

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New U.S. Tariffs Stir Global Trade Worries

The U.S. just rolled out a fresh wave of tariffs on major trading partners, including India and China, citing national security and unfair trade practices. These new duties target sectors like steel, aluminium, electronics, and medical devices. Global markets are watching closely, worried that this could trigger another trade slump.

But here’s the upside: Moody’s says India is one of the least vulnerable emerging economies. Why? Because it doesn’t lean heavily on goods exports and has a broad trade portfolio that spreads the risk.

India’s Export Landscape: Spread Out and Steady

India’s export game is growing but isn’t overly tied to one product or region. Around 17% of exports go to the U.S., primarily pharmaceuticals, IT services, textiles, and machinery.

Yes, some sectors, like jewellery, textiles, and engineering goods, could suffer. But the Indian government and trade groups are already taking action. They’re scouting new markets, renegotiating trade deals (think EU), and boosting local demand to absorb any surplus.

Ajay Sahai from the Federation of Indian Export Organisations said, "There might be some short-term pain, but we’re building long-term resilience.” He also pointed out that India’s shift toward higher-value exports and newer markets like Africa and Latin America is starting to pay off.

Homegrown Demand Drives Growth

One of India’s most significant strengths? Its economy runs mostly on what happens at home. Household spending makes up nearly 60% of GDP, helping to keep the engine running even if global demand slows.

Moody’s puts it: Unlike other emerging economies that rely heavily on exports, India’s growth is powered by what’s happening inside the country.

Government investment also plays a significant role, especially in infrastructure like roads, energy, and digital projects. Programs like ‘Make in India’ and the Production Linked Incentive (PLI) scheme encourage more local manufacturing and reduce import dependency.

Growth Outlook & Inflation: Slight Dip, Still Solid

Moody’s has trimmed India’s 2025 GDP growth forecast to between 5.5% and 6.5% (down from 6.4%). But that’s still pretty strong considering the global headwinds.

Inflation is also under control, hovering around 4.5%, comfortably within the RBI’s target zone. That’s thanks to tighter monetary policy, better food supply management, and cooling commodity prices.

Financial System Holding Strong

India’s banks are in good shape. Asset quality in public sector banks has improved, and credit is flowing, especially to small businesses and consumers. Indian banks aren’t deeply tied to global trade finance, which lowers the risk of getting caught in international turmoil.

Add to that India’s strong capital markets and improved access to global funding, and you’ve got a financial system that can handle bumps in the road.

Ready for What Comes Next

The Indian government isn’t just sitting back. Commerce Minister Piyush Goyal recently said they’re in talks with the U.S. to ease tariff tensions and are pushing for new trade deals to spread the risk.

India has inked pacts with countries like the U.A.E., Australia, and South Korea in the last couple of years. A trade agreement with the U.K. could follow.

A Smarter Trade Strategy: Go Digital, Go Diverse

India’s trade strategy is evolving fast. The focus? More market diversity, innovative products, and digital tools to speed things up. Better ports and logistics, thanks to the National Logistics Policy, are helping supply chains run smoother.

And with more high-tech exports, from electronics to renewables to pharma, India is slowly shifting away from traditional, low-margin industries.

Economist Arvind Panagariya said it best: “India is moving from low-value exports to a sophisticated producer. And that shift is only going to speed up.”

Final Take: Growing Through the Noise

Bottom line: Despite global trade tensions and rising tariffs, Moody’s remains confident in India’s direction. A diverse economy, strong domestic demand, and proactive policymaking are acting as buffers against the storm.

Yes, some export sectors might feel the pinch. But with inflation in check, foreign reserves hitting over $640 billion, and a government focused on reform and resilience, India’s not just bracing for impact, it’s aiming to come out stronger.