Fitch maintains India’s FY26 GDP forecast at 6.5%, raises FY27 projection to 6.3%
New Delhi: Fitch Ratings has kept India’s GDP growth forecast for FY26 unchanged at 6.5% while revising its FY27 projection slightly upward to 6.3% from 6.2% in its December update.
"We expect overall GDP growth of 6.5% in FY25-26 and a slight slowdown to 6.3% in FY26-27. These forecasts are largely unchanged from the December GEO," Fitch stated in its report.
Fitch's revised projection surpasses the OECD’s 6.4% estimate for FY26 but remains below the Reserve Bank of India’s forecast of 6.7%.
The Indian economy expanded by 6.2% in the third quarter of FY24, rebounding from a near two-year low of 5.6% in the July-September period.
“We do not anticipate this soft patch turning into a prolonged slump. Consumer and business confidence remain strong, infrastructure expansion continues to drive investment, capacity utilisation is high, and trade data showed a sharp rebound in exports in October,” Fitch noted.
For the current fiscal year, the agency expects the economy to grow by 6.4%.
On inflation, Fitch maintained its FY26 forecast at 4% but raised its FY27 projection to 4.3% from the previously estimated 4%.
The agency is also more optimistic about rate cuts, forecasting the RBI's policy rate to settle at 5.75% by the end of FY26, with no further cuts expected by FY27.
This is lower than its December forecast of 6.25% for FY26 and 6% for FY27.
"The RBI initiated policy easing in early February with a 25bp rate cut to 6.25%. We anticipate two more rate reductions this year, bringing the policy rate to 5.75% by December 2025," Fitch said.
Economists expect the RBI to announce consecutive rate cuts in April and June meetings.
Global Outlook
On the global front, Fitch lowered its 2024 growth forecast to 2.3%, down 0.3 percentage points from its previous estimate of 2.9%.
The agency's latest projections factor in a 15% Effective Tariff Rate (ETR) on Europe, Canada, Mexico, and others in 2025, alongside a 35% tariff on China.
As a result, the US ETR is expected to reach 18% this year before easing to 16% in 2026 as levies on Canada and Mexico drop to 10%.
“This would be the highest tariff rate in 90 years," Fitch noted, adding that the tariff hikes could reduce GDP by approximately one percentage point in the US, China, and Europe by 2026.
The US has already imposed tariffs on steel and aluminium and expanded duties on imports from China, Canada, and Mexico.
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