Trade war escalation is expected to shave off another 10 bps from India’s growth in FY26, with the economy expected to grow 6.4 percent in FY26 compared with 6.5 percent, Fitch Ratings said on April 17.
The ratings agency noted that the global economy is expected to receive further setback despite a pause on tariffs, as the growing trade war between China and the US hurts growth prospects.
“Fitch Ratings has sharply lowered its forecast for world growth in response to the severe escalation in the global trade war. In a special update to its quarterly Global Economic Outlook, Fitch has cut world growth in 2025 by 0.4 pp and China and US growth by 0.5 pp from the March edition,” Fitch noted.
The US economy is now expected to slowdown to 1.2 percent in 2025 compared with 1.7 percent projected in March, while China will have to settle with 3.9 percent growth compared with 4.4 percent estimated a month ago. Global growth will settle at 1.9 percent, falling below 2 percent for the first time since the pandemic.
The Chinese economy grew 5.4 percent in the first quarter.
US and China have both imposed over 100 percent tariffs on each others imports.
“It is hard to predict US trade policy with any confidence, but Fitch now assumes the US ETR on China will remain above 100% for some time before falling back to 60% in 2026. For now, we stick with our March assumption of a 15% US ETR on other trade partners,” Fitch said in its report.
Fitch was more optimistic on inflation front, as it projected inflation to fall to 3.9 percent by the end of 2025. It expects RBI to deliver another 50 bps reduction in the policy rate, over and above the 50 bps RBI has cut since February.
Policy rate is expected to settle at 5.5 percent by 2025 end.
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