Moody’s Cuts India’s 2026 Growth Forecast To 6% As Global Headwinds Pose Threat

Moody’s has made a steep cut of 0.8 percentage points to India’s economic growth forecast for 2026. The rating agency has now projected growth at 6 per cent from its earlier estimate of 6.5 per cent.

The agency said the downgrade was mainly due to rising global trade tensions, weak external demand, and increasing uncertainty in the global economy.

“The global outlook remains highly uncertain amid an increasingly prolonged confrontation and fragile ceasefire between the US and Iran. We estimate growth losses ranging from around 0.8 ppt for India,” Moody’s said in its Global Macro Outlook May update report.

Moody’s expects global economic growth to slow because of trade restrictions, geopolitical tensions, and weaker investment activity in several countries.

India’s economy is still expected to remain one of the fastest-growing major economies in the world despite the lower forecast.

Moody’s noted that domestic demand in India continues to remain relatively strong, supported by government infrastructure spending and steady consumption activity.

However, the report said slower global growth could affect India’s exports, manufacturing activity, and business investment in the coming months.

The agency also warned that higher energy prices and global financial market volatility could create additional pressure on emerging economies, including India.

Rising oil prices have increased inflationary pressure on the economy, which may result in reduced GDP growth.

According to the report, uncertainty related to global trade policies and geopolitical developments has increased risks for businesses and investors worldwide.

Moody’s said central banks in many countries are likely to remain cautious on interest rates because inflation risks still remain in several economies.

India’s medium-term growth outlook continues to remain positive because of structural reforms, digitalisation, infrastructure investment, and strong domestic consumption.

However, the agency said maintaining fiscal discipline and controlling inflation would remain important for sustaining long-term economic growth.