Global economy tipping towards a sharp slowdown, India ‘may lose a step’ too: Moody's Analytics
New Delhi: The global economy is headed for a slower growth phase over the next two years, with India also expected to lose momentum, as
New Delhi: The global economy is headed for a slower growth phase over the next two years, with India also expected to lose momentum, as an extended US-Iran conflict threatens to trigger a fresh energy shock, reignite inflation and force central banks into tighter monetary policy, according to Moody’s Analytics. In its latest global outlook, ‘Running Hot, Running Cold’, Moody’s said the world economy is becoming increasingly divided, with countries and industries benefiting from the artificial intelligence (AI) investment boom outperforming those weighed down by geopolitical tensions, higher commodity prices and trade disruptions. The report said that the combination of geopolitical uncertainty, persistent inflationary pressures and tight monetary conditions means the balance of risks remains tilted decisively to the downside. “The world economy is unlikely to derail. But uncertainty around the baseline forecast runs high, and it would not take much to tip the trajectory towards a sharper slowdown, or even a recession,” it said. The agency expects global GDP growth to slow to 2.5% in 2026 from 2.9% in the previous year, before recovering modestly to 2.8% in 2027, remaining below the global economy’s long-term potential growth rate of over 3%. For India, the report does not specify numerical forecasts but says the country “will lose a step” alongside the broader global slowdown, reflecting weaker external demand, higher energy costs and tighter global financial conditions.
Already lowered Already, the Reserve Bank of India (RBI) has lowered India’s real GDP growth projection for the 2026-27 fiscal year to 6.6% from the earlier estimate of 6.9%. This view is shared by the World Bank that has also pegged India’s GDP growth at 6.6% this fiscal year. The Asian Development Bank, which had projected India’s GDP growth at 6.9% this fiscal year in April has also trimmed the projection to 6.6% for the year. Meanwhile, the International Monetary Fund (IMF) has marginally lowered its growth view to 6.4% for FY27, 10 basis points lower from its previous 6.5% estimate. “The AI boom has prevented a steeper downturn,” Moody’s said, noting that massive investments in data centres, semiconductors and computing infrastructure have created a K-shaped global economy, where technology-driven sectors continue to expand while traditional industries struggle under higher costs and geopolitical uncertainty. Also Read | Why India Inc's rising profit share in GDP will be tough to sustain in FY27 However, the ratings firm’s economists warned that the resilience offered by AI may not be enough if tensions in West Asia escalate further. A prolonged disruption in West Asia and renewed attacks affecting shipping through the Strait of Hormuz could sharply raise oil prices, spiking inflation worldwide and undermining economic growth, it said.
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