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Informist, Monday, Aug. 4, 2025

 

NEW DELHI - Fitch Ratings has lowered its forecast for India's GDP growth for the current financial year by 10 basis points to 6.3%. The rating agency, however, sees limited direct imapct of US tariffs on Indian corporates.

 

"We expect India's GDP growth of 6.3% and robust infrastructure spending to underpin healthy demand for cement and building materials, electricity, petroleum products, steel, and engineering and construction companies during FY26," Fitch Friday said in the 'India Corporates Credit Trends' report. The rating agency had in April projected India's FY26 GPD growth at 6.4%. 

 

Fitch's growth projection is lower than the Reserve Bank of India's forecast of India's GDP growth at 6.5% for FY26. The Internation Monetary Fund last week raised India's FY26 growth forecast by 20 bps to 6.4%. But economists fear US' imposition of 25% tariff on imports from New Delhi could lower India's GDP growth by 20-40 basis points.  

 

US President Donald Trump last week announced a 25% tariff on imports from India and an unspecified penalty for India's military and oil trade with Russia. While lower than the 26% tariff first announced in April, the levy is much higher than faced by other Asian economies. Moody's Ratings Monday said it expects India's manufacturing sector prospects to be hit because of US tariffs but India's domestic demand is expected to remain resilient.

 

Fitch sees limited direct impact on rated Indian corporates from higher US tariffs because of the "low to moderate US export exposure". However, second-order risks from excess supply could arise in some cases, it added. 

 

India and the US are negotiating a trade agreement and officials from Washington are expected to arrive in New Delhi on Aug. 25 for the next round of negotiations. "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. 

 

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, Fitch said. "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."  End

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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