Fitch Adjusts India GDP Forecast to 6.3% for FY26
Fitch Ratings has adjusted India’s GDP growth forecast for the current financial year, lowering it to 6.3% from a previous estimate of 6.4%. The global rating agency’s latest report indicates that while the recently imposed US tariffs may have a limited direct impact on Indian corporations, robust infrastructure spending is expected to sustain demand across key sectors. The report highlights that despite the downward revision, credit metrics for Indian corporates are anticipated to improve in the coming fiscal year.
Revised GDP Growth Forecast
Fitch Ratings has revised its GDP growth projection for India, now estimating a growth rate of 6.3% for the current financial year. This adjustment comes after the agency had previously forecasted a growth rate of 6.4% in its Global Economic Outlook report released in April. The report emphasizes that strong infrastructure spending will play a crucial role in maintaining demand across various core sectors, including cement, electricity, petroleum products, and engineering and construction. Fitch’s analysis suggests that this sustained demand will support the performance of companies operating in these industries during FY26.
Impact of US Tariffs
The report also addresses the implications of the recently announced 25% tariffs by the United States, which are expected to have a limited direct effect on Indian corporates. Fitch noted that Indian companies have low-to-moderate exposure to US exports, which mitigates the potential impact of these tariffs. However, the agency cautioned about possible “second-order risks” that could arise from global excess supply. The ongoing negotiations for a bilateral trade agreement between India and the US may further influence trade dynamics, particularly as India remains firm against US demands for duty concessions on agriculture and dairy products.
Sector-Specific Insights
Fitch’s report highlights that sectors focused on the domestic market, such as oil and gas, cement, telecom, and utilities, are likely to experience minimal disruptions from tariff-related issues due to strong local demand. Conversely, sectors like IT services and automotive components may face challenges in discretionary exports to the US and Europe, particularly in FY26. The pharmaceutical sector is also identified as potentially vulnerable to policy changes from the US government. Additionally, the report warns that steel and chemicals could encounter pricing pressures due to oversupply in global markets, while the metals and mining sector may see increased price volatility amid emerging global growth risks.
Future Outlook for Indian Corporates
Despite the macroeconomic adjustments, Fitch anticipates an improvement in credit metrics for rated Indian corporates in FY26. The agency expects wider EBITDA margins to counterbalance the effects of high capital expenditure. This positive outlook suggests that Indian companies may navigate the challenges posed by external factors, including tariffs and global market conditions, while continuing to capitalize on domestic demand. As companies explore export diversification strategies to mitigate tariff impacts, the overall resilience of the Indian corporate sector remains a focal point for future growth.
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