Fitch cuts GDP growth projections to 6.3%; sees mild impact of US tariffs

Fitch Ratings on Friday cut India's GDP projections for the current fiscal to 6.3 per cent and said it expects a limited direct impact of higher US tariffs on Indian corporates.

In its Global Economic Outlook in April, Fitch had estimated India's GDP growth at 6.4 per cent for 2025-26.

"We expect India's GDP growth of 6.3 per cent and robust infrastructure spending to underpin healthy demand for cement and building materials, electricity, petroleum products, steel, and engineering and construction (E&C) companies during FY26," Fitch said in its India Corporates Credit Trends report released on Friday.

Fitch Ratings expects credit metrics to improve for its rated Indian corporates in the financial year ending March 2026, as wider EBITDA margins offset their high capex intensity.

On the impact of US tariffs, Fitch said it expects a "limited direct impact" on its rated Indian corporates from higher US tariffs due to generally low to moderate US export exposure.

However, second-order risks from excess supply could arise in some cases. An India-US trade deal could also affect the final outcome, and companies may try to mitigate the impact from tariffs by diversifying exports, Fitch said. 

US President Donald Trump has announced 25 per cent tariffs on India, plus a 'penalty' for its trade with Russia. The tariffs will come into effect from August 7.

India and the US are already negotiating a bilateral trade deal. In the deal talks, India has hardened its position on the US demand for duty concessions on agri and dairy products. New Delhi has, so far, not given any duty concessions to any of its trading partners in a free trade agreement in the dairy sector.

Fitch Ratings, in its report, said domestically focused sectors such as oil and gas upstream and downstream, cement and building materials, engineering and construction, telecom, and utilities should see minimal direct effects, supported by local demand and/or regulatory stability.

However, tariff uncertainty may limit discretionary IT and auto supplier exports to the US and Europe in FY26, while potential US policy shifts could affect pharmaceuticals.

Steel and chemicals may face pricing pressure from excess supplies diverted to India, and metals and mining could see greater price volatility amid growth risks, Fitch added.