Fitch Lowers India's GDP Growth Forecast to 6.3%; Predicts Minimal Impact from US Tariffs

Fitch Ratings has lowered India’s GDP growth projection for FY26 to 6.3%, down from its earlier estimate of 6.4%. The revision was mentioned in its India Corporate Credit Trends report released on August 1, 2025. The agency said high infrastructure spending is expected to support demand in core sectors.

According to the report, industries such as cement, power, petroleum products, construction, and building materials are likely to see steady demand. Fitch also expects credit metrics to improve across rated Indian firms, aided by wider EBITDA margins despite ongoing capex.

Limited Direct Impact from US Tariffs

The report also noted that most rated Indian companies have low to moderate exposure to US exports. This is expected to limit the direct impact of the 25% tariffs announced by the US. These tariffs, along with additional penalties related to India’s trade with Russia, are set to come into effect from August 7, 2025.

Second-Order Risks 

While the immediate impact is likely to be muted, Fitch cautioned that excess global supply may get redirected to India in sectors like steel and chemicals. This could lead to pricing pressure and volatility, particularly for metals and mining firms.

Auto, IT and Pharma 

Export-dependent sectors such as IT services and auto components may see demand affected due to tariff uncertainty in the US and Europe. Shifts in US policy may also impact Indian pharmaceutical exports.

Read more: IMF Raises India GDP Growth Forecast to 6.4% for FY26 and FY27!

India Pushes Back in Trade Talks

India has resisted US demands for duty concessions in agriculture and dairy. These segments have not been opened to trade partners under any existing free trade agreement. Ongoing negotiations may affect how companies manage export diversification.

As per the report, Sectors like telecom, oil and gas, utilities, and construction are expected to remain relatively insulated due to local demand and regulatory stability.

Conclusion

Fitch’s revised outlook showcases global trade pressures and domestic resilience. Key domestic sectors may remain steady, while exporters face a more uncertain environment.

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