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Moody’s Ratings has forecasted that India will grow at 6.5% in the current financial year (FY2025-26), making it the fastest-growing economy among both developed and emerging G-20 countries. The estimate was published on Tuesday in the agency’s latest report on emerging markets.
Moody’s attributed India’s resilient growth to ongoing tax measures and continued monetary easing, helping to offset risks from global capital outflows and US policy uncertainty.
Emerging Markets Face Global Disruptions
According to Moody’s, emerging markets (EMs) will navigate turbulent conditions caused by shifting US trade and financial policies, which are expected to reshape global capital flows, supply chains, and geopolitics.
However, the report noted that larger EMs like India and Brazil have sufficient resources to weather global financial pressures thanks to domestically oriented economies, deep capital markets, and stable foreign exchange reserves.
RBI Expected to Cut Rates Again in April
India’s central bank, the RBI, has already reduced interest rates by 25 basis points to 6.25% in February and is expected to announce another cut during its April 9 monetary policy review. Moody’s projects average inflation at 4.5% for FY2025-26, down from 4.9% in the previous fiscal year.
The Indian government has also increased the income tax exemption threshold from Rs 7 lakh to Rs 12 lakh in the FY2025-26 budget, offering tax relief worth Rs 1 lakh crore to the middle class.
Capital Inflows Expected Despite Global Risks
Moody’s report highlighted that India will remain attractive to global investors, even amid rising risks of capital outflows tied to uncertain US policies. Factors such as policy stability, macroeconomic fundamentals, and moderate fiscal management contribute to India’s strong investment climate.
Asia-Pacific to Drive Global Growth
Growth across emerging markets will moderate slightly in 2025-26, according to Moody’s, but Asia-Pacific will continue to lead. However, its integration with global trade also makes it vulnerable to US tariffs and external shocks.
India’s domestically driven economy and policy resilience position it more favorably than smaller peers to attract capital and resist volatility, the agency noted.
