India's financial outlook stays sturdy relative to friends, whilst momentum has moderated up to now two years, mentioned the ranking company. “We forecast GDP progress of 6.5% within the fiscal yr ending March 2026 (FY26), unchanged from FY25, and effectively above the ‘BBB' median of two.5%.”
Fitch mentioned that home demand will stay stable, underpinned by the continuing public capex drive and regular personal consumption. Nevertheless, personal funding is prone to stay “average”, notably given heightened US tariff dangers. The agency mentioned that there was a notable slowdown in nominal GDP progress, which it forecasts to increase 9.0% in FY26, from 9.8% in FY25 and 12.0% in FY24.
Tariff Dangers
The company mentioned,that the direct influence on GDP will likely be modest as exports to the US account for two% of GDP, however tariff uncertainty will dampen enterprise sentiment and funding. The Trump administration is planning to impose a 50% headline tariff on India by 27 August, though Fitch believes this can ultimately be negotiated decrease.
Furthermore, India's potential to profit from provide chain shifts out of China can be diminished if US tariffs in the end stay above that of Asian friends, it mentioned. “Proposed items and companies tax (GST) reforms, if adopted, would assist consumption, offsetting a few of these progress dangers.”
Room for price lower
Fitch mentioned that low inflation will present house for yet another 25bp lower in 2025. Falling meals costs and coverage actions by the Reserve Financial institution of India (RBI) have saved inflation contained. Core inflation is secure across the 4% mid-point of the RBI's 2%-6% goal band. Headline inflation fell to 1.6% in July, pushed primarily by easing meals costs. The RBI lower its coverage repo price 100bp to five.5% between February and June 2025.Credit score progress slowed to 9.0% in Might from 19.8% a yr earlier on account of excessive coverage charges and tighter macroprudential measures on unsecured shopper credit score. Nevertheless, we anticipate credit score progress to choose up on the financial easing, it added.
Medium-Time period Outlook
Fitch estimates potential GDP progress of 6.4%, led by sturdy public capex, a personal funding pick-up and beneficial demographics. “We assume wholesome company and financial institution steadiness sheets will spur an funding acceleration, however this may occasionally depend upon higher visibility over the home consumption outlook.”
“The federal government's deregulation agenda and GST reforms ought to assist incremental progress. Passage of different vital reforms, particularly on land and labour legal guidelines, appears politically troublesome. Nonetheless, some state governments are prone to advance such reforms. India has signed a number of bilateral commerce agreements, however commerce boundaries stay comparatively excessive.”
