India is poised to spearhead economic growth in the Asia-Pacific (APAC) region, with a projected GDP expansion of 7% in 2025, according to a recent report by Moody's Ratings. This robust growth will position India ahead of other emerging markets like Vietnam, Indonesia, and Malaysia, as well as advanced economies including Australia. Moody's also forecasts a 6.4% growth for India in 2026, continuing to lead its regional peers.
The agency attributes India's strong performance to its robust domestic growth drivers, which provide economic resilience amidst global uncertainty. These drivers include infrastructure development, strong consumption demand, and investment.
In comparison, the overall APAC region is expected to see a more modest growth of 3.6% in 2025 before stabilizing at 3.4% in 2026. Emerging markets within APAC are predicted to be the primary engine of growth, with an average expansion of 5.6%, significantly outpacing the 1.3% average growth expected in advanced markets.
Despite the Indian Rupee's depreciation against the US dollar in recent months, Moody's notes that most rated Indian companies have implemented effective currency risk management strategies or possess strong financial buffers. Investment-grade companies also continue to have smooth access to global capital markets. However, Moody's also pointed out that companies in sectors like oil and gas, airlines, telecom, and ride-hailing, face dollar exposure due to currency mismatches between rupee-based revenues and dollar-denominated input costs or borrowings.
Regarding the potential impact of the United States' tariffs, Moody's anticipates that the effects will be transmitted to companies through three primary channels: trade, weakening macroeconomic conditions, and financial markets. While India's direct exposure to the US offers some cushion, sentiment-driven spillover effects remain a concern.
Moreover, geopolitical risks continue to shape the landscape in the APAC region. The ongoing tensions between the US and China are a significant factor, with Moody's cautioning about potential disruptions to semiconductor supply chains and increased regional divisions. Despite these challenges, Moody's has maintained a 'stable' outlook for APAC, excluding Greater China. However, they also warn that a sharper economic slowdown in China or an escalation of geopolitical tensions could lead to a negative shift in the outlook.
