Fitch Ratings expects India’s economy to grow 6.5% in FY26 and 6.3% in FY27, with low dependence on external demand helping shield it from potential U.S. tariff actions. The agency maintained its FY26 forecast while slightly raising its FY27 estimate from 6.2% to 6.3%.
This outlook is more optimistic than the OECD’s 6.4% forecast for FY26 but falls short of the Reserve Bank of India’s (RBI) projection of 6.7%. India’s economy rebounded in Q3, growing 6.2%, recovering from a two-year low of 5.6% in the previous quarter. Fitch does not expect this slowdown to lead to a prolonged slump, citing strong consumer and business confidence, infrastructure investments, and rising exports.
For the current fiscal year, Fitch projects 6.4% GDP growth. It also maintained India’s inflation forecast at 4% for FY26 but revised its FY27 estimate upward to 4.3%. The agency expects RBI to continue rate cuts, lowering the policy rate to 5.75% by December 2025, down from the previously estimated 6.25%.
On the global front, Fitch cut its growth projection for 2024 from 2.9% to 2.3%, citing the impact of rising tariffs. The U.S. is set to impose higher effective tariff rates, including 15% on Europe, Canada, and Mexico, and 35% on China. These tariffs are expected to peak at 18% in 2024 before moderating to 16% in 2025. Fitch warns that these trade measures could reduce GDP growth by about 1 percentage point in the U.S., China, and Europe by 2026.
