FILE PHOTO: Employees work at the Blue Energy liquefied natural gas (LNG) truck manufacturing facility in Pune, India, October 11, 2024.
Credit: Reuters Photo
New Delhi: Global ratings agency Fitch on Wednesday raised India’s GDP growth projection for the financial year 2026-27 by 10 basis points to 6.3% and kept its estimate for 2025-26 steady saying the Indian economy is somewhat insulated from the impact of the high US tariffs.
“We expect overall GDP growth of 6.5% in FY25-26 and a slight slowdown in growth in FY26-27, to 6.3%. More aggressive-than-expected US trade policies are an important risk to our forecast, though India is somewhat insulated given its low reliance on external demand,” Fitch Ratings said in its latest Global Economic Outlook report.
The rating agency’s growth projection for 2025-26 is largely in line with the Economic Survey’s estimate of 6.3–6.8%.
According to Fitch Ratings, the Reserve Bank of India (RBI) is likely to resort to two additional repo rate cuts in 2025. In February the RBI lowered the policy repo rate by 25 basis points to 6.25%. The RBI is expected to bring down the repo rate to 5.75% by December 2025, Fitch noted in its report. Repo rate is the interest rate at which the RBI lends money to commercial banks.
The ratings agency noted that capital spending in India is likely to pick up over 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,” it said.
On the global front, Fitch said global trade war fueled by US President Donald Trump’s tariff policies is likely to hit the American economy. The tariff war is likely to reduce US GDP growth and push inflationary pressure.
For 2025, Fitch has lowered US economic growth projection to 1.7% from its earlier estimate of 2.1% announced in December 2024. It has also lowered the US growth forecast for 2026 to 1.5% from 1.7%. “These rates are well below trend and down from almost 3% annual growth in 2023 and 2024,” it said.