India’s GDP growth forecast revised downward

Fitch Ratings cut India’s GDP growth forecast to 6.4% for 2025–26, citing escalating global trade tensions. U.S. tariff hikes and China’s retaliation have pushed bilateral tariffs over 100%. Global growth forecasts were also lowered, with the U.S., China, and Eurozone expected to see slower economic expansion through 2026.

Fitch Ratings has revised India’s GDP growth forecast for the current fiscal year (2025-26) downward by 10 basis points to 6.4%, citing escalating global trade tensions, particularly a severe trade conflict between the US and China. The agency also trimmed the 2024-25 forecast to 6.2%, while maintaining the 2026-27 projection at 6.3%. The downgrade reflects mounting concerns over the impact of global policy uncertainty, falling equity prices, reduced household wealth, and weakened business investment—especially in the wake of unpredictable US trade policies.

In its updated Global Economic Outlook (GEO), Fitch observed, “It is hard to predict US trade policy with any confidence. Massive policy uncertainty is hurting business investment prospects, equity price falls are reducing household wealth, and US exporters will be hit by retaliation.” 

Fitch noted that recent U.S. trade policy moves—specifically the “Liberation Day” tariff hikes—have intensified trade tensions, particularly with China. Although initially paused and replaced with a temporary 10% universal tariff for 90 days, these policies triggered a series of retaliatory tariffs between the U.S. and China. As a result, bilateral tariff rates have surged above 100%.

The U.S. average effective tariff rate (ETR) now stands at 23%, the highest since 1909 and significantly above Fitch’s earlier estimate of 18% from March. The agency now expects the U.S. ETR on China to stay above 100% for an extended period before moderating to 60% in 2026. For other trade partners, the U.S. ETR is expected to remain at 15%.

Fitch also lowered its 2025 global GDP growth forecast by 0.4 percentage points. The U.S. and China saw their 2025 growth estimates cut by 0.5 percentage points each, with the U.S. expected to grow at 1.2% and China’s growth projected to fall below 4% in both 2025 and 2026. Eurozone growth is expected to remain below 1%, highlighting broad global economic softness.