Moody’s said the macroconomic conditions in India would be stable, reinforced by moderating levels but still high growth amid a strong public investment and healthy private consumption. | Photo credit: Andrew Kelly
Moody’s qualifications on Monday said that increasing tensions with Pakistan can lead to greater budgetary expense and, therefore, slowing down fiscal consolidation in India. However, it does not see much impact on the Indian economy, but the tension would probably weigh on the growth of Pakistan.
In a report on southern Asia, Moody’s said that macroconomic conditions in India would be stable, reinforced by modern but even high growth levels in the middle of a strong public investment and healthy private consumption. “In a scenario of escalation sustained in localized tensions, we do not expect important interruptions to the economic activity of India because it has minimal economic relations with Pakistan (less than 0.5 percent of the total exports of India in 2024.
India assigned more than ₹ 6.81 Lakh Crore in the 2025-26 Union Budget for the Ministry of Defense. This is more than 9.5 for higher than the FY24-25.
Speaking about Pakistan, the report said that the escalation sustained in tensions with India would probably weigh the growth of Pakistan. In addition, it can hinder the continuous fiscal consolidation of the government, delaying the progress of Pakistan to achieve macroconomic stability. The macroeconic conditions of Pakistan have improved, with growth gradually increasing, the decrease in inflation and foreign exchange reserves increase in the midst of continuous progress in the IMF program.
“A persistent increase in tensions could also affect Pakistan’s access to external financing and press their foreign exchange reserves, which remain well below what is required to meet their payment needs of the external debt over the next few years,” the report said. This report has arrived at a time, when the Executive Board of the International Monetary Fund (IMF) is scheduled to meet on May 9 to review the extended agreement under the installation found extended for Pakista. The agenda also includes the “modification of performance criteria” and an “agreement under the center of resilience and sustainability.”
The report took a statement from a statement from the Minister of Information of Pakistan who said that India was planning an imminent military strike against Pakistan as a retaliation for the Pahalgam incident on April 22. After the attack, the diplomatic relations of India and Pakistan have deteriorated.
India suspended the 1960 Indo Water Treaty, which could severely reduce the Pakistan water supply. In response, Pakistan suspended the 1972 Shimla Peace Treaty with India, arrested bilateral trade and closed its airspace to Indian airlines. “Our geopolitical risk assessment for Pakistan and India explains persistent tensions, which have sometimes brought to limited military responses. We assume that the outbreak will occur periodically, as they have done through the” post-endless “after the notes, the noteinigns. Military information of broad base,” the report said.
Posted on May 5, 2025
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