India’s economic growth is projected to remain strong at 6.5 per cent in FY26 and 6.3 per cent in FY27, according to global ratings agency Fitch. The agency released its latest forecast on Wednesday, and kept the estimate for the 2025-26 fiscal year (FY26) unchanged while revising the 2026-27 fiscal year (FY27) growth outlook slightly higher from 6.2 per cent to 6.3 per cent.
The agency highlighted that India’s low dependence on external demand would help cushion the impact of US tariff policies, ensuring continued economic expansion for the country, reported Moneycontrol. “We expect overall GDP growth of 6.5 per cent in FY25-26 and a slight slowdown in growth in FY26-27, to 6.3 per cent. These forecasts are little changed from the December GEO,” the ratings agency said.
While Fitch’s projection aligns closely with the OECD’s estimate of 6.4 per cent for FY26, it remains below the Reserve Bank of India’s (RBI) forecast of 6.7 per cent.
Also Read : Siemens To Cut 8 Per Cent Jobs In Digital Industries Division, Layoff 450 Employees In EV Charging Unit
Inflation and Interest Rate Expectations
Notably, the Indian economy registered 6.2 per cent growth in the third quarter of the current 2024-25 fiscal year (FY25), bouncing back from a two-year low of 5.6 per cent recorded in the July-September quarter.
Fitch expressed confidence in India’s economic stability and said, “We do not think that this soft patch will translate into a prolonged slump in economic activity. Consumer and business confidence remain strong; a push for infrastructure expansion supports investment; capacity utilisation remains high; monthly trade data show a sharp pick-up in exports in October.”
For FY25, growth is estimated at 6.4 per cent. However, the ratings agency increased its inflation forecast for FY27 to 4.3 per cent, from the earlier estimate of 4 per cent.
Fitch also revised its outlook on interest rate cuts, predicting that the RBI will lower rates to 5.75 per cent by the end of FY26, compared to 6.25 per cent projected earlier in December.
The agency no longer expects any further rate cuts in FY27. “The RBI began loosening policy in early February with a 25bp cut in the repo rate to 6.25 per cent. We expect two further cuts in the policy rate this (calendar) year, so that the policy rate will be 5.75 per cent by December 2025 (revised down from 6.25 per cent in the last GEO),” it stated. Economists anticipate these rate reductions to occur in April and June.
Also Read : Morgan Stanley Planning To Layoff Almost 2,000 Employees In March, Says Report
Global Economic Slowdown and Rising Trade Barriers
On the global front, Fitch revised its 2024 world growth forecast downward from 2.9 per cent to 2.3 per cent, citing increasing economic uncertainty. The report factored in potential US tariff hikes, predicting that by 2025, an Effective Tariff Rate (ETR) of 15 per cent would be imposed on Europe, Canada, and Mexico, while China would face a 35 per cent tariff.
“This will push the US ETR to 18 per cent this year before moderating to 16 percent next year as the ETR on Canada and Mexico falls to 10 per cent. This would be the highest rate in 90 years,” the ratings agency said.
Fitch estimated that these tariff increases could reduce GDP growth by 1 percentage point in the US, China, and Europe by 2026. The US has already imposed tariffs on steel and aluminium products, alongside broader trade restrictions on China, Canada, and Mexico.
