India’s huge domestic market is likely to insulate the nation from the effects of the US tariff increase, with Fitch expecting a 6.5% growth for FY26. The international ratings agency reaffirmed its FY26 growth estimate for India at 6.5%, raising its FY27 estimate to 6.3%, up from the earlier 6.2%.
This forecast is more optimistic than the OECD’s 6.4% growth forecast for FY26 but lower than the Reserve Bank of India (RBI) forecast of 6.7%. Another Morgan Stanley report also said the same, including India in the list of “best placed countries in Asia” to weather global volatility with potential US tariff increases. The primary reason mentioned is India’s low goods exports-to-GDP ratio, which minimizes exposure to global trade disruptions.
Fitch added that though India has some vulnerabilities from the increase in tariffs, its lower dependence on international goods trade puts the nation in a better position relative to others. In the third quarter of the ongoing financial year, India’s economy expanded by 6.2%, bouncing back from a fall to 5.6% during the July-September quarter.
The report also emphasized strong consumer and business confidence, ongoing infrastructure investments, and high capacity utilization, which all contribute to economic resilience. Fitch has a 6.4% GDP growth estimate for the ongoing financial year and expects inflation to be stable at 4% in FY26 and increase to 4.3% in FY27.
Besides, Fitch also expects the RBI to reduce interest rates again in 2025 and lower the repo rate by December to 5.75%. Nevertheless, the world economic outlook has been revised downward, with Fitch lowering its global growth forecast to 2.3% from an earlier 2.9% in 2024.
