India’s strong domestic market cushions economy against global trade shocks: Report

New Delhi, May 21 India is in a stronger position than other countries to withstand global trade disruptions, in the wake of the US tariff turmoil, due to the large size of its domestic market and the country’s low dependence on goods exports, according to a Moody’s report released on Wednesday.

The report points out that the government initiatives, such as increasing infrastructure investment, steps taken to boost private consumption, will help shield India’s economy from weakening global demand.

“India’s large domestic economy and limited exposure to global goods trade puts it in a stronger position to absorb external shocks,” the report said.

Some sectors -- like automobiles, which export to the US -- may encounter global headwinds, despite their diversified operations. But India’s robust services sector and large domestic economy provide strong buffers, according to the report.

The report also states that declining inflation is expected to pave the way for a soft monetary policy with interest rate cuts to spur growth. The banking sector also has sufficient liquidity to support credit growth, according to the report.

The Moody’s report also observes that the recent India-Pakistan tensions are more likely to weigh on Pakistan’s economy than India’s. The key economic hubs in India are far from the conflict zones, and bilateral economic ties remain limited.

However, a prolonged escalation could lead to increased defence spending, which might slow fiscal consolidation efforts and impact government finances, the report added.

Moody’s Ratings had earlier this month pegged India's GDP growth at 6.3 per cent for 2025 and expects the economy to pick up momentum in 2026 to record a 6.5 per cent growth rate.

The forecast is in line with the IMF outlook, which sees India as the only major economy in the world to record an over 6 per cent growth rate in 2025.

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