Fitch cuts India growth estimates: What does this mean for the nation?

One of the ‘big three’ US credit assessment firms Fitch Ratings slashed India’s GDP growth outlook by 10 basis points (bps) to 6.4 per cent for the current fiscal FY2025-2026. However, it was not just India that bore the brunt of the latest cut in growth projections—Fitch pulled global growth estimates by 0.4 percentage points and cut China and the US by 0.5 percentage points.

Earlier this month, the Reserve Bank of India (RBI) concluded its 54th meeting of the Monetary Policy Committee (MPC), cutting key interest rate by 25 bps to 6 per cent. However, the highlight was that it also cut the country’s GDP growth forecast for FY2026 to 6.5 per cent from the earlier estimate of 6.7 per cent. Fitch Ratings’s latest growth revisions seem to echo the RBI outlook.

In a special update to the quarterly Global Economic Outlook (GEO), the ratings firm stated: “Massive policy uncertainty is hurting business investment prospects, equity price falls are reducing household wealth, and US exporters will be hit by retaliation.” It also stressed that it was “hard to predict” the trade policy of the US under Donald Trump “with any confidence”

Excluding the pandemic, Fitch noted that the world would see the weakest global growth rate since 2009.

For India, Fitch Ratings pulled down GDP growth estimates for both FY2024-2025 and FY2025-2026 (current fiscal) by 10 bps each to 6.2 per cent and 6.4 per cent, respectively. However, it retained the fiscal 2026-27 growth at 6.3 per cent.

The latest outlook revisions by Fitch follow the effect of Trump tariffs. According to Fitch, the US average effective tariff rate (ETR) rose to 23 per cent—the highest since 1909. This beat earlier Fitch estimates of 18 per cent.

The latest trends posted by the World Trade Organisation (WTO) seem to be in line with Fitch Ratings, as it warned of a possible 0.2 per cent volume decline in world merchandise trade for 2025 due to high tariffs slapped by the US and China on one another.

In the WTO Secretariat’s latest Global Trade Outlook and Statistics report, the organisation noted that the volume of world merchandise trade is expected to decline and reach “nearly three percentage points lower than what would have been expected under a low tariff baseline scenario.”

This also spells bad news for India, which aims to lift goods and services exports to $2 trillion by 2030. However, the silver lining for the country came with March export numbers—India’s exports turned positive after four months in March, with goods and services exports hitting an all-time high of $820 billion. While goods are directly affected by international tariffs, services are also affected indirectly. The RBI now projects inflation in India at 4 per cent in fiscal 2026, with the next MPC meeting scheduled from June 4 to June 6, 2025.

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