Global rating agency Fitch said on March 19 that India does not expect much damage due to American action on tariffs, as it is less dependent on external demand. The country’s economy is expected to grow at 6.5 percent in FY 2026 and 6.3 percent next year. Fitch has kept India’s development estimate of FY 2026 unchanged at 6.5 percent. While the increase of 6.3 percent for FY 2027 has been estimated. It is noteworthy that in the December update, he estimated an increase of 6.2 percent for FY 2027.
Fitch said in this report, “It is estimated that GDP growth in FY 2025-26 will be at 6.5 percent and in FY 2026-27, the growth rate will decrease marginally to 6.3 percent. There has been a slight change in these forecasts since December GEO.”
Fitch’s estimate is better than OECD, which has estimated an increase of 6.4 percent in FY 26. But this is less than the Reserve Bank of India’s estimate of 6.7 percent. Meanwhile, the economy has gained momentum, and its growth rate in the third quarter of the financial year was 6.2 percent, which is more than the lowest level of 5.6 percent in the July-September period.
Fitch further said that he does not believe that this recession in the economy will cause long -term recession in economic activities. Consumer and commercial confidence remains strong. Focusing on the expansion of infrastructure is promoting investment, capacity utilization remains high, and monthly trade data shows a rapid increase in exports in October.
Fitch has estimated that the economy will grow at a rate of 6.4 percent in the current financial year. Additionally, it maintained India’s inflation forecast at 4 percent and increased inflation forecast for FY 27 from 4 percent to 4.3 percent. Fitch also believes that inflation in India will fall further and it will move towards the RBI’s target of 4 percent. This will reduce the RBI interest rates. Fitch believes that by the end of FY 2026, this rate will be reduced to 5.75 percent and there will be no deduction by the end of FY 2027. In December update, the rating agency had estimated a rate of 6.25 percent for FY 26 and 6 percent by the end of FY 27.
On the global front, Fitch has reduced its growth rate estimate for 2024 to 0.3 percent to 2.9 percent to 2.3 percent. Fitch said in its report, “Our latest economic forecasts show that Europe, Canada, Mexico and other countries will be subject to an effective tariff rate (ETR) of 15 percent in 2025.
With this, the effective tariff rate (ETR) in the US will be 18 percent this year. Whereas next year, ETRs on Canada and Mexico will decrease by 10 percent to 16 percent. This will be the highest rate in 90 years. Modeling suggests that the increase in tariffs will reduce the GDP in the US, China and Europe by about 1 percent by 2026.
The US has already put tariffs on steel and aluminum products. He has also imposed tariffs on China, Canada and Mexico.
