India is "somewhat insulated" from the aggressive trade policies of US President Donald Trump, and will manage to expand its economy by 6.5% in fiscal 2026, according to Fitch Ratings.
The agency's GDP forecast comes on the back of 6.3% growth projection for the financial year ending March 31, 2025. In FY27, the economic growth rate is expected to slow to 6.3%, as per Fitch's Global Economic Outlook – March 2025.
These forecasts are little changed from the agency's December reading.
"More aggressive-than-expected US trade policies are an important risk to our forecast, though India is somewhat insulated given its low reliance on external demand," the report said.
Business confidence and lending growth remain strong, while the Union Budget's high capital expenditure and lower cost of capital are expected to boost investment in FY26 and FY27, the agency said.
Net exports have supported GDP growth this year due to a combination of strong export growth and falling imports. We expect this to normalise so that net exports' growth contribution will be broadly neutral over FY26 and FY27.
Fitch expects world growth to slow to 2.3% this year.
The outlook for India contrasts with that of the world hit by "staggering" size, speed, and breadth of US tariff hike announcements since January. Fitch cut its 2025 growth forecast for the US to 1.7% from 2.1% in December and 2026 forecast to 1.5% from 1.7%.
Mexico and Canada, the focus of Trump's most punitive tariff policies, will experience technical recessions given their high US trade exposure, Fitch said.
The agency expects world growth to slow to 2.3% this year, well below trend and down from 2.9% in 2024. Growth will remain weak at 2.2% in 2026.
"Tariff hikes will result in higher US consumer prices, reduce real wages and increase companies' costs, and the surge in policy uncertainty will take a toll on business investment. Retaliation will hit US exporters. Export-oriented global manufacturers in East Asia and Europe also will be affected," the report said.
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