China's Loss Could Be India's Gain In Donald Trump's World - Moody's

Moody's has cautioned that India's fiscal challenges will continue to limit its creditworthiness in 2025, despite potential advantages arising from US-China tensions. The credit rating agency's latest report on Asia-Pacific sovereigns highlights that, while growth and inflation are stabilising, India's fiscal situation remains a concern, with only gradual fiscal consolidation expected.

According to Moody's, India's debt levels will stay significantly higher than the Baa-rated peer median, which stands at approximately 57%. Despite recent revenue growth, the country’s ability to manage its debt remains weaker compared to its peers.

The report further notes that political instability and social unrest could pose considerable risks to both the economy and fiscal health. Geopolitical issues in the Asia-Pacific region, particularly the ongoing US-China tensions, are also expected to continue in 2025, although the likelihood of military conflict in the Taiwan Strait or Korean Peninsula remains low.

Moody's suggests that the strained US-China relations may disrupt regional trade and investment patterns, potentially diverting business away from China. This shift could, however, offer opportunities for India and other Southeast Asian nations to benefit from increased economic activity in these sectors.

The agency also pointed out that after upcoming elections in several key economies, governments may face tough decisions about whether to prioritise fulfilling electoral promises or pursue fiscal consolidation. These political dynamics could add further uncertainty to the economic outlook.

(With PTI Inputs)