Last Updated:
Fitch Ratings in its March Global Economic Outlook report says that while more aggressive-than-expected US trade policies pose a risk to its forecast, India is somewhat insulated due to its low reliance on external demand.
Fitch Ratings says business confidence remains high, and lending surveys point to continued double-digit growth in bank lending to the private sector.
India’s GDP growth is expected to grow at 6.5 per cent in the financial year 2025-26 and 6.3 per cent in the subsequent financial year FY27, according to rating agency Fitch Ratings. Though the forecast for FY26 remains unchanged, the FY27 projection is higher by 10 basis points as compare with earlier projections of Fitch.
Fitch’s forecast is an improvement on OECD, which expects 6.4 per cent growth in FY26 but lower than the RBI’s projection of 6.7 per cent.
In its March Global Economic Outlook report, Fitch Ratings said that while more aggressive-than-expected US trade policies pose a risk to its forecast, India is somewhat insulated due to its low reliance on external demand.
It said that the consumer spending in India will increase after the tax-free income allowances and revised tax brackets announced in the Budget 2025. Fitch also expects a jump in capital expenditure in the next two financial years.
“Business confidence remains high, and lending surveys point to continued double-digit growth in bank lending to the private sector… These factors — together with a reduction in the cost of capital — underpin our expectation of a pickup in capital spending for FY26 and FY27,” Fitch Ratings said in the report.
In the last quarter ended December 2024 (Q3 FY25), India’s GDP grew 6.2 per cent, which was significantly higher than the seven-quarter low of 5.6 per cent recored in Q2.
On the RBI rate cuts, Fitch Ratings said, “The RBI began loosening policy in early February with a 25bp cut in the repo rate to 6.25 percent. We expect two further cuts in the policy rate this (calendar) year, so that the policy rate will be 5.75 percent by December 2025 (revised down from 6.25 percent in the last GEO).”
On the global economy, Fitch lowered growth forecast by 0.3 percentage points to 2.3 per cent compared with 2.9 per cent in 2024.
“Our latest economic forecasts assume a 15 percent Effective Tariff Rate (ETR) will be imposed on Europe, Canada, Mexico, and others in 2025, and 35 per cent on China. This will push the US ETR to 18 percent this year before moderating to 16 percent next year as the ETR on Canada and Mexico falls to 10 per cent. This would be highest rate for 90 years,” it said.
“Modelling suggests tariff increases will reduce GDP by about 1pp in the US, China, and Europe by 2026,” Fitch further added.
