India Set to Lead Emerging Markets With 7% GDP Growth in 2025, Says Moody’s

India to Lead Emerging Market Growth in 2025 with 7% GDP Rise, Says Moody’s Ratings

India is set to outperform major global and regional economies in 2025, with Moody’s Ratings projecting a 7% GDP rise, placing the country firmly at the forefront of emerging market growth. Despite global volatility, policy uncertainty and tightening financial conditions across the world, India’s economic momentum continues to stand out as resilient and broad-based.

In its latest assessment released on Friday, Moody’s said India will not only lead growth among emerging market economies but also outpace all countries in the Asia-Pacific (APAC) region. The rating agency expects India’s GDP to expand 7% in 2025 and 6.4% in 2026, supported by strong domestic demand, steady investments, and the country’s robust financial system.

Moody’s Foresees India as the Brightest Spot in APAC’s Growth Landscape

Moody’s highlighted that while the broader APAC region is expected to maintain steady momentum, no economy comes close to India’s projected pace. The agency estimates:

• APAC GDP growth at 3.6% in 2025

• APAC stabilizing at 3.4% in 2026, compared to 3.3% in 2024

India’s projected 7% growth is nearly double the regional average and far ahead of the 1.3% average growth expected in advanced APAC economies, such as Japan, South Korea, Australia and New Zealand.

This significant divergence reflects India’s expanding consumer base, resilient services sector, and strong investment cycle—factors Moody’s believes will keep the country’s growth engine running even as global headwinds intensify.

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Emerging Markets Expected to Drive APAC’s Growth, With India Leading the Pack

Moody’s noted that APAC’s economic narrative will continue to be shaped by emerging markets in 2025 and beyond. On a weighted-average basis, emerging markets will grow at 5.6%, vastly outperforming the 1.3% expected in advanced economies.

India’s contribution to this expansion remains outsized. Strong household consumption, public and private capex, and improving export competitiveness are expected to reinforce the country’s position as the region’s primary growth driver.

Moody’s emphasised that India’s domestic growth engines—including manufacturing activity, services expansion, and infrastructure spending—provide the resilience needed to withstand a global slowdown.

Resilient Domestic Drivers Keep India on Strong Growth Path

The rating agency outlined several domestic factors underpinning India’s continued expansion:

1. Strong private consumption

India’s rising disposable incomes and expanding middle class continue to support robust consumption growth, accounting for more than half of GDP.

2. Healthy investment momentum

With both central and state governments maintaining high capital expenditure, and private sector investments gradually reviving, the investment cycle is expected to remain stable.

3. Services sector dominance

Sectors such as IT, financial services, real estate, professional services and hospitality continue to demonstrate resilience, anchoring economic activity.

4. Manufacturing push

Government programs such as Production-Linked Incentives (PLI) are drawing more companies into domestic manufacturing, creating new capacity and demand.

Rupee Weakness Not a Major Concern as Corporates Manage Risks Well

Moody’s acknowledged that the Indian rupee’s persistent weakness against the US dollar has raised concerns. However, the agency underlined that most rated companies have effective currency risk management frameworks, including hedging strategies and natural financial buffers.

Investment-grade Indian firms, it added, continue to maintain strong access to international capital markets, helping them navigate the volatility in global interest rates and currency markets.

The rating agency expects the rupee to remain under some pressure in the near term due to global dollar strength, though not at levels that threaten corporate balance sheets or overall stability.

India’s Economic Resilience Enhances Global Investor Confidence

Moody’s reiterated that India’s growth resilience—despite geopolitical tensions, high global interest rates and external demand softness—has strengthened its position as a preferred investment destination.

Foreign investment flows, particularly in manufacturing, services and digital infrastructure, continue to show strength. The country’s improving governance, regulatory clarity and expanding digital ecosystems are helping sustain high investor confidence in both the public and private markets.

A Positive Outlook as India Anchors Global Growth Amid Uncertainty

The agency concluded that India’s strong macro fundamentals, combined with a favourable demographic profile and structural reforms, will ensure that the country remains a global growth engine through 2025 and 2026.

While challenges such as global trade pressures, inflation uncertainty and currency fluctuations remain, Moody’s believes India’s economic buffers are robust enough to withstand these risks.

With the 7% GDP rise in 2025, India is expected to not only lead emerging markets but also shape the growth trajectory of the entire Asia-Pacific region.

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