Moody’s said that the macroeconomic conditions in India would be stable, bolstered by moderating but still high levels of growth amid strong public investment and healthy private consumption.
| Photo Credit:
ANDREW KELLY
Moody’s Ratings on Monday, said that escalating tensions with Pakistan may result in higher Budget spending and thus slowing down fiscal consolidation in India. However, it does not see much impact on Indian economy, rather the tension would likely weigh on Pakistan’s growth.
In a report on South Asia, Moody’s said that the macroeconomic conditions in India would be stable, bolstered by moderating but still high levels of growth amid strong public investment and healthy private consumption. “In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India‘s economic activity because its has minimal economic relations with Pakistan (less than 0.5 per cent of India‘s total exports in 2024). However, higher defence spending would potentially weigh on India‘s fiscal strength and slow its fiscal consolidation,” it said.
India allocated over ₹6.81 lakh crore in the Union Budget 2025-26 for the Ministry of Defence . This is over 9.5 per higher than FY24-25 .
Talking about Pakistan, the report said that sustained escalation in tensions with India would likely weigh on Pakistan’s growth. Further, it may hamper the government’s ongoing fiscal consolidation, setting back Pakistan’s progress in achieving macroeconomic stability. Pakistan’s macroeconomic conditions have been improving, with growth gradually rising, inflation declining and foreign-exchange reserves increasing amid continued progress in the IMF programme.
“A persistent increase in tensions could also impair Pakistan’s access to external financing and pressure its foreign-exchange reserves, which remain well below what is required to meet its external debt payment needs for the next few years,” the report said. This report has come at a time, when the Executive Board of the International Monetary Fund (IMF) is scheduled to meet on May 9 to review the Extended Arrangement Under the Extended Fund Facility for Pakista. The agenda also includes request for’ ‘Modification of Performance Criteria’ and for an “Arrangement under the Resilience and Sustainability Facility.”
The report took note of a statement by Pakistan’s Information Minister who said that India was planning an imminent military strike against Pakistan as retaliation for the April 22 Pahalgam incident. Following the attack, India and Pakistan’s diplomatic relations have deteriorated.
India suspended the Indus Waters Treaty of 1960, which could severely reduce Pakistan’s water supply. In response, Pakistan suspended the 1972 Shimla peace treaty with India, halted bilateral trade and closed its airspace to Indian airlines. “Our geopolitical risk assessment for Pakistan and India accounts for persistent tensions, which have, at times led to limited military responses. We assume that flare-ups will occur periodically, as they have throughout the two sovereigns’ post-independence history, but that they will not lead to an outright, broad-based military conflict,” the report said.
Published on May 5, 2025
Moody’s said that the macroeconomic conditions in India would be stable, bolstered by moderating but still high levels of growth amid strong public investment and healthy private consumption.
| Photo Credit:
ANDREW KELLY
Moody’s Ratings on Monday, said that escalating tensions with Pakistan may result in higher Budget spending and thus slowing down fiscal consolidation in India. However, it does not see much impact on Indian economy, rather the tension would likely weigh on Pakistan’s growth.
In a report on South Asia, Moody’s said that the macroeconomic conditions in India would be stable, bolstered by moderating but still high levels of growth amid strong public investment and healthy private consumption. “In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India‘s economic activity because its has minimal economic relations with Pakistan (less than 0.5 per cent of India‘s total exports in 2024). However, higher defence spending would potentially weigh on India‘s fiscal strength and slow its fiscal consolidation,” it said.
India allocated over ₹6.81 lakh crore in the Union Budget 2025-26 for the Ministry of Defence . This is over 9.5 per higher than FY24-25 .
Talking about Pakistan, the report said that sustained escalation in tensions with India would likely weigh on Pakistan’s growth. Further, it may hamper the government’s ongoing fiscal consolidation, setting back Pakistan’s progress in achieving macroeconomic stability. Pakistan’s macroeconomic conditions have been improving, with growth gradually rising, inflation declining and foreign-exchange reserves increasing amid continued progress in the IMF programme.
“A persistent increase in tensions could also impair Pakistan’s access to external financing and pressure its foreign-exchange reserves, which remain well below what is required to meet its external debt payment needs for the next few years,” the report said. This report has come at a time, when the Executive Board of the International Monetary Fund (IMF) is scheduled to meet on May 9 to review the Extended Arrangement Under the Extended Fund Facility for Pakista. The agenda also includes request for’ ‘Modification of Performance Criteria’ and for an “Arrangement under the Resilience and Sustainability Facility.”
The report took note of a statement by Pakistan’s Information Minister who said that India was planning an imminent military strike against Pakistan as retaliation for the April 22 Pahalgam incident. Following the attack, India and Pakistan’s diplomatic relations have deteriorated.
India suspended the Indus Waters Treaty of 1960, which could severely reduce Pakistan’s water supply. In response, Pakistan suspended the 1972 Shimla peace treaty with India, halted bilateral trade and closed its airspace to Indian airlines. “Our geopolitical risk assessment for Pakistan and India accounts for persistent tensions, which have, at times led to limited military responses. We assume that flare-ups will occur periodically, as they have throughout the two sovereigns’ post-independence history, but that they will not lead to an outright, broad-based military conflict,” the report said.
Published on May 5, 2025
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The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making
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It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution
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