Fitch cuts India's GDP projection by 10 bps to 6.4% as trade war escalates

Fitch says, excluding the pandemic, world growth rate to be the weakest since 2009

Fitch Ratings on Thursday revised India’s FY26 gross domestic product (GDP) growth downwards by 10 basis points to 6.4 per cent compared to its March outlook, before the announcement of US tariffs amid trade war escalation. The ratings agency, however, has retained India’s FY27 growth projection at 6.3 per cent.

 

Fitch Ratings, in its Global Economic Outlook April 2025, said that world growth is projected to fall below 2 per cent this year and that, excluding the pandemic, this would be the weakest global growth rate since 2009.

 

In its March update, the ratings agency had said that while more aggressive-than-expected US trade policies are “an important risk” to its forecast, India was somewhat insulated given its low reliance on external demand.

 

The April outlook projected China’s growth to fall below 4 per cent both this year and next, and growth in the eurozone to remain stuck well below 1 per cent.

 

For the US, the report said that growth would remain in positive territory at 1.2 per cent for 2025 but will “slow to a crawl through the year at just 0.4 per cent year-on-year in the fourth quarter of 2025”.

 

The Economic Survey has projected India’s GDP growth for FY26 at 6.3–6.8 per cent. According to official estimates, GDP growth in the current financial year would be 6.5 per cent.

 

The country’s real GDP growth slowed to 5.4 per cent in the July–September 2024 quarter before rebounding to 6.2 per cent in the following quarter.

 

On Wednesday, Moody’s Ratings revised its forecast for India’s GDP growth for calendar year 2025 downward from 6.6 per cent in February to a lower range of 5.5 to 6.5 per cent amid a raft of new US tariffs. It said that the tariffs will weigh on global trade activity, reduce demand for regional exports and undermine business confidence, leading to reduced investment in the Asia-Pacific region.

 

Moody’s Ratings noted that India had relatively low overall exposure but more diversified exports to the US.

 

Moody’s Analytics, a division of Moody’s Ratings, had also recently revised India’s GDP forecast for calendar year 2025 downward by 30 basis points to 6.1 per cent due to tariff threats from the US hitting the gems and jewellery, medical devices, and textile industries the worst.