India’s Economic Resilience: Moody’s Confirms Fastest-Growing Status Amidst Tariff Challenges
I. India’s Robust Growth Trajectory Confirmed by Moody’s:
India’s economic growth is notable in a dynamic global landscape, especially amidst international trade challenges. Credit rating agency Moody’s consistently affirms an optimistic economic outlook for India, projecting it as the world’s fastest-growing major economy through 2027. This resilience is attributed to strong internal drivers and strategic adaptability.
Moody’s “Global Macro Outlook 2026-27” (circa November 2025) forecasts India’s real GDP growth at 7.0% in 2025, moderating to 6.4% in 2026, and projecting 6.5% in 2027. Key growth drivers include strong domestic demand, significant infrastructure spending, solid consumption patterns, successful diversification of export markets, a neutral-to-easy monetary policy stance (amidst low inflation), positive international investor sentiment attracting substantial capital flows, and continued commitment to public investment (while private sector capital spending remains cautious).
II. Navigating the Tariff Maze: Initial Impact of US Tariffs:
Specific sectors in India have been affected by US tariffs on India. The Trump administration’s imposition of steep 50% tariffs on some Indian products, linked to India’s continued purchase of Russian oil, led to an 11.9% decline in Indian exports to the US for tariff-hit products. Some reports indicated a 12% drop compared to the previous year after tariffs were announced (circa September 2025).
Traditional export sectors, particularly labor-intensive ones like textiles, gems and jewelry, and leather goods, experienced significant declines in growth rates. This created concerns about job losses and loss of competitiveness for small to medium-sized exporters. Moody’s earlier caution (August 2025) suggested tariffs could potentially shave 0.3 percentage points off India’s then-forecasted GDP growth. The initial trade war impact created uncertainty, forcing industries to re-evaluate strategies.
III. India’s Masterstroke: Strategic Export Diversification:
India’s export diversification strategy proved to be a powerful mitigating factor against headwinds, demonstrating remarkable trade resilience. Despite declines in US shipments for tariff-hit products, India’s overall exports climbed by 6.75% in September 2025. This success was driven by strategic redirection of exports to alternative markets.
Notable growth was seen in electronic goods exports, especially smartphones, which expanded by 50.5%, signifying a trend towards higher-value, technology-driven exports. Targeted regions included Southeast Asia, the Middle East (UAE as a key partner for cotton garments and tea), Africa, Latin America, and East Asian countries (Japan, China, Vietnam, Thailand, South Korea). This proactive approach cushioned external shocks and reinforced the stability of the resilient Indian economy. Furthermore, a recent US announcement exempting over 250 food products, including agricultural items, from reciprocal tariffs, is expected to benefit Indian agro-exporters.
IV. Deep Dive: Sectors Under Pressure and Their Responses:
While the broader economy is resilient, specific export sectors face concentrated impacts from US tariffs.
Textiles:
The textile sector, the second-largest employer in India after agriculture, sees the US market accounting for nearly 30% of its textile and apparel exports. The 50% US tariff, compounded with existing duties, leads to 52-64% effective rates, making Indian textiles uncompetitive. This has resulted in order cancellations, a projected 20-25% hit to exports in the next six months, potential revenue losses of $2.5-$3 billion, and threatens thousands of jobs, especially in MSMEs. In response, the industry is exploring alternative markets and pushing for expedited Free Trade Agreements (FTAs) with the UK and EU.
Gems and Jewelry:
A significant export contributor, the gems and jewelry sector relies heavily on the US, its largest market, accounting for 30-40% of annual exports. The 50% US tariff (a drastic increase from previous zero tariffs) renders products uncompetitive. October 2025 saw a sharp decline in overall gross exports (30.57%), with cut and polished diamonds down 26.97% and gold jewelry down 24.61%. Over 100,000 jobs are at risk. The industry is considering shifting production to low-tariff countries (UAE, Mexico) and actively seeking new markets in the EU and Middle East.
Leather Industry:
The leather industry is heavily export-dependent, with 70-80% of its revenue from exports. US tariffs of 25%, potentially rising to an effective 50-80% with other taxes, are projected to cause a 10-12% revenue decline in FY26. This has led to order cancellations, business shifting to Bangladesh and Vietnam, and at least 50 factories in Tamil Nadu’s Ambur region closing, endangering 75,000 jobs. Exporters are absorbing costs, squeezing profit margins, and urgently seeking government support while exploring ways to retain global market share.
V. Government Initiatives: Fueling Make in India and Export Growth:
To bolster India exports and enhance its global economic growth footprint, the government has implemented a comprehensive array of policy frameworks and initiatives. Key policies include the Foreign Trade Policy (FTP) 2023-28 (evolving to FTP 2025), aiming for a $2 trillion export target by 2030 through simplified procedures and trade facilitation. The newly approved Export Promotion Mission (EPM), with an outlay of ₹25,060 crore, provides financial (NIRYAT PROTSAHAN) and non-financial (NIRYAT DISHA) assistance for market diversification. Other schemes like Remission of Duties and Taxes on Exported Products (RoDTEP) and the Export Promotion Capital Goods (EPCG) Scheme further support export competitiveness.
The Atmanirbhar Bharat Program, through its Production-Linked Incentive (PLI) Schemes, is boosting domestic manufacturing across 13 key sectors, aiming to transform India into a global manufacturing hub and reduce import dependence. Infrastructure development, such as modernized ports and logistics corridors under programs like Sagarmala, is fast-tracked to reduce costs and time for exporters. The focus areas include supporting existing sectors and fostering emerging ones like pharmaceuticals, electronics, and specialized chemicals.
VI. The Undeniable Trajectory: India’s Economic Might:
Moody’s reaffirmation of India as the fastest-growing economy globally through 2027 is a testament to its inherent strengths. While US tariffs on India have presented targeted challenges to textiles, gems and jewelry, and leather, the broader India economy has absorbed these shocks with remarkable resilience. This stability is attributed to robust domestic demand, strategic infrastructure investments, and a proactive, multi-faceted export diversification strategy.
Government initiatives under Atmanirbhar Bharat and Make in India are crucial for strengthening manufacturing, fostering innovation, and opening new trade avenues. India’s expansion of its global footprint, stronger ties with new markets, and product focus rebalancing position it well to achieve its $2 trillion export target by 2030. In conclusion, India’s economic growth is robust, adaptive, and solidifies its position as a beacon of global economic growth and a formidable international player.
About the Author
