India’s large domestic market is expected to shield its economy from the impact of rising US tariffs, helping the country maintain stable growth global ratings agency Fitch has stated.
Fitch has kept its growth forecast for India unchanged at 6.5 per cent for the financial year 2025-26 (FY26), with an upward revision for FY27 to 6.3 per cent, up from the earlier estimate of 6.2 per cent.
Fitch’s forecast compares favorably with the Organisation for Economic Co-operation and Development (OECD), which expects India’s economy to expand by 6.4 per cent in FY26, although it remains slightly below the Reserve Bank of India’s (RBI) projection of 6.7 per cent.
According to Fitch, the sheer size of India’s domestic market reduces its reliance on external demand, providing a buffer against global economic headwinds, including any slowdown in global goods trade.
A recent report by Morgan Stanley echoed this view, stating that India is “the best placed country in Asia” amid global uncertainty triggered by potential tariff hikes. The report cited India’s low goods exports-to-GDP ratio and strong economic fundamentals as key factors behind its resilience.
India’s economy demonstrated strong momentum in the third quarter of the current financial year, recording a growth rate of 6.2 per cent. This marked a recovery from the 5.6 per cent growth seen in the preceding quarter. Fitch noted that the temporary slowdown is unlikely to develop into a prolonged period of weak economic activity, pointing to robust consumer and business confidence, sustained infrastructure investment, high capacity utilisation, and a sharp rebound in exports in recent months.
For the current financial year, Fitch has projected a GDP growth rate of 6.4 per cent.
On inflation, Fitch has maintained its forecast at 4 per cent for FY26 but raised its estimate for FY27 to 4.3 per cent, up from the 4 per cent previously projected.
The agency also expressed optimism about further monetary easing by the RBI. With inflation easing, Fitch expects the central bank to implement two additional rate cuts this year, reducing the repo rate to 5.75 per cent by December 2025. The RBI had earlier cut the repo rate by 25 basis points to 6.25 per cent in February.
Meanwhile, Fitch has lowered its global economic growth forecast by 0.3 percentage points to 2.3 per cent for 2025, compared to an estimated 2.9 per cent growth in 2024.
—IANS
