New Delhi: The large size of India’s domestic market, which reduces reliance on external demand, is expected to insulate the country from the US tariff hike, with the economy expected to maintain a growth of 6.5 per cent in FY26, global ratings agency Fitch said on Wednesday.
The ratings agency kept India’s FY26 forecast unchanged at 6.5 per cent while projecting a higher 6.3 per cent growth for FY27, up from 6.2 per cent in its December update. Fitch’s forecast is an improvement on OECD, which expects 6.4 per cent growth in FY26 but lower than the Reserve Bank of India’s projection of 6.7 percent.
A recent Morgan Stanley report had also stated that India is the “best placed country in Asia,” amid the global uncertainty triggered by US President Donald Trump’s threat to jack up tariffs, because of the nation’s low goods exports to GDP ratio and strong fundamentals.
“While India is exposed to direct tariff risks, we believe on balance India is less exposed to global goods trade slowdown considering that it has the lowest goods exports to GDP ratio in the region,” the report stated.
The Indian economy picked up momentum, growing 6.2 per cent in the third quarter of the current financial year, recovering from a near two-year low of 5.6 per cent in the July-September period.
“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,” the Fitch report stated.
The report projects a 6.4 per cent GDP for the current financial year. The Fitch report keeps India’s inflation forecast unchanged at 4 per cent and upped the FY27 forecast to 4.3 per cent from the 4 per cent projected earlier.
Fitch is more optimistic about the RBI going in for another rate cut as inflation has come down. “The RBI began loosening monetary policy in early February with a 25 basis points cut in the repo rate to 6.25 per cent. We expect two further cuts in the policy rate this year, so that the policy rate will be 5.75 per cent by December 2025,” the report said.
Fitch has lowered its growth forecast for the world economy by 0.3 percentage points to 2.3 per cent compared with 2.9 per cent in 2024.