The rating agency kept India’s FY26 forecast unchanged at 6.5 percent while projecting a higher 6.3 percent growth for FY27 from 6.2 percent in its December update
Low reliance on external demand is expected to insulate India from US action on tariffs, with the economy maintains growth of 6.5 percent in FY26 and 6.3 percent the following year, global ratings agency Fitch said on March 19.
The ratings agency kept India’s FY26 forecast unchanged to 6.5 percent while projecting a higher 6.3 percent growth for FY27, up from 6.2 percent in its December update.
“We expect overall GDP growth of 6.5 percent in FY25-26 and a slight slowdown in growth in FY26-27, to 6.3 percent. These forecasts are little changed from the December GEO,” Fitch said in the report.
Fitch’s forecast is an improvement on OECD, which expects 6.4 percent growth in FY26 but lower than the Reserve Bank of India’s projection of 6.7 percent.
The economy picked pace, growing 6.2 percent in the third quarter of the fiscal, recovering from a near two-year low of 5.6 percent in the July-September period.
We do not think that this soft patch will translate into a prolonged slump in economic activity. Consumer and business confidence remain strong; a push for infrastructure expansion supports investment; capacity utilisation remains high; monthly trade data show a sharp pick-up in exports in October,” Fitch said.
It projects the economy to grow 6.4 percent in the current fiscal.
On prices front, it kept India’s inflation forecast unchanged at 4 percent and upped the FY27 forecast to 4.3 percent from the 4 percent projected earlier.
Fitch is more optimistic about rate cuts as well as inflation inches lower towards the RBI’s 4 percent target. It expects rates to settle at 5.75 percent by the end of FY26 and no cuts by FY27 end.
In its December update, the rating agency had projected 6.25 percent rate for FY26 and 6 percent for FY27 end.
“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),” it said.
Economists expect RBI to deliver two consecutive rate cuts in April and June meetings.
On the global front, Fitch lowered growth forecast by 0.3 percentage points to 2.3 percent compared with 2.9 percent 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 percent 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 percent. 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.
The US has already levied tariffs on steel and aluminium products. It has also slapped blanket tariffs on China, Canada and Mexico.
Source: www.moneycontrol.com