India’s Growth Engine Unfazed By Tariffs, To Lead G20 Through 2027: Moody’s

India is expected to withstand the impact of Trump-era tariffs and remain the fastest-growing economy among G-20 nations over the next two years, with growth projected at 6.5% through 2027, according to Moody's Ratings in its Global Macro Outlook 2026-27 report released on Wednesday.

The agency said India's growth momentum will be driven by robust infrastructure investment, strong consumer demand, and diversified exports, even as private sector capital spending continues to be cautious.

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Moody's noted that India's economy has remained resilient despite global challenges and elevated U.S. tariffs on select exports. “Indian exporters, facing 50% U.S. tariffs on certain products, have managed to redirect shipments, with overall exports rising 6.75% in September, even as exports to the U.S. declined 11.9%,” the report said.

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The rating agency attributed India's stability to a neutral-to-easy monetary policy and low inflation, which have supported domestic growth. “In India, the RBI held its repo rate steady in October, reflecting caution in policy as inflation remains subdued and growth strong,” Moody's added.

It also highlighted that strong international capital inflows, driven by positive investor sentiment, have cushioned external shocks and maintained liquidity in the system. While domestic demand continues to be the main growth engine, Moody's observed that the private sector is yet to fully recover confidence for large-scale investments.

Globally, Moody's projected GDP growth of 2.5%-2.6% in 2026 and 2027, suggesting steady but uneven expansion across regions. Advanced economies are expected to grow around 1.5%, while emerging markets, led by India, are likely to expand close to 4%. The report said “policy divergence and trade shifts will shape a stable but mixed global growth outlook” as countries adapt to post-pandemic and geopolitical shifts.

In comparison, the United States is witnessing slower but steady momentum, supported by moderate consumer spending and AI-driven investment. Moody's said that “narrow credit spreads, strong equity markets, and ample liquidity have created benign financial conditions.” It added that fiscal stimulus, a more accommodative monetary policy, and regulatory easing could extend the U.S. credit cycle into 2026, helping offset tariff and immigration pressures, though risks could build as the cycle matures.

For Europe, the report highlighted a modest recovery backed by employment gains, stable wages, and monetary easing by the European Central Bank. Investments in infrastructure and green technologies, including Germany's fiscal push in defence and public projects, are expected to further support growth.

Meanwhile, China's economy is projected to expand 5% in 2025, supported by government stimulus and strong exports, though domestic fundamentals remain soft with uneven consumption, weak corporate lending, and shrinking fixed asset investment. Moody's expects China's real GDP growth to gradually slow to 4.2% by 2027.

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