Fitch Ratings Lowers India's GDP Forecast Amid US Tariff Concerns

Fitch Adjusts India's Economic Growth Projections

New Delhi: Fitch Ratings has revised its GDP growth forecast for India for the current fiscal year to 6.3%, citing limited direct effects from increased US tariffs on Indian companies.

Previously, in its April Global Economic Outlook, Fitch had projected a GDP growth of 6.4% for the fiscal year 2025-26.

The agency anticipates that India's GDP growth will be supported by strong infrastructure investments, which will drive demand for sectors such as cement, building materials, electricity, petroleum, steel, and engineering and construction (E&C) firms throughout FY26.

Fitch Ratings also predicts an improvement in credit metrics for rated Indian corporations by the end of March 2026, as wider EBITDA margins help counterbalance their high capital expenditure intensity.

Regarding the US tariffs, Fitch believes that the direct impact on rated Indian corporates will be minimal due to their generally low to moderate exposure to US exports.

However, there could be secondary risks stemming from excess supply in certain instances. The outcome of ongoing India-US trade negotiations may also influence the situation, with companies likely to seek ways to mitigate tariff impacts by diversifying their export markets.

US President Donald Trump has announced a 25% tariff on India, along with a penalty related to its trade with Russia, effective from August 7.

India and the US are currently in discussions for a bilateral trade agreement, with India taking a firm stance against US requests for duty reductions on agricultural and dairy products. So far, New Delhi has not granted any duty concessions to its trading partners in the dairy sector under free trade agreements.

Fitch's report indicates that sectors focused on domestic markets, such as oil and gas, cement, engineering and construction, telecommunications, and utilities, are expected to experience minimal direct impacts, bolstered by local demand and regulatory stability.

Nonetheless, uncertainty surrounding tariffs may restrict discretionary exports from the IT and automotive sectors to the US and Europe in FY26, while potential shifts in US policy could influence the pharmaceutical industry.

Additionally, steel and chemical sectors may encounter pricing pressures due to excess supplies redirected to India, and the metals and mining industries could face increased price volatility amid growth uncertainties.