The FY25 growth projection has also been revised downward by 10 basis points to 6.2%.
The United States has imposed steep tariffs on several countries, including India, with the effective rate exceeding 100% for China.
These measures are currently on a 90-day pause, during which a universal tariff rate of around 10% is in effect across economies. India’s net trade contribution is expected to decline to 0.6 percentage points in FY26 from 1.7 percentage points in FY25, reflecting the impact of global trade disruptions.
Global gross domestic product (GDP) growth is now forecast at 1.9%, reduction from 2.3% projected earlier, according to the ‘Global Economic Outlook – April 2025 update’ by the rating agency.
“World growth is projected to fall below 2% this year; excluding the pandemic, this would be the weakest global growth rate since 2009,” the report said.
The US economy is projected to slow to 1.2% in 2025 from 2.8% in 2024, weighed down by policy uncertainty, falling equity prices, and potential trade retaliation, according to the agency.
It projects US inflation to rise to 4.3% in 2025 from 2.9% in the year before, according to the agency.
China’s economic growth is expected to drop to 3.9% in 2025 from 5% in 2024. Net trade accounts for a third of the country’s GDP growth.
While exporters face challenges in redirecting sales in China, Fitch Ratings expects fiscal and monetary policy easing to offset some of the pressure.
“Some additional US tariff revenues will be recycled back into the US economy over the next 18 months including through tax cuts,” it added.
In India, consumer spending growth is projected to slow to 6.4% in FY26 and 5.4% in FY27, down from 7% in FY25.
Retail inflation fell to a 67-month low of 3.3% in March, according to official data released earlier this week.
The rating agency forecasts India’s inflation will rise to 4.5% in 2026 from 3.9% in 2025.
Content Source: economictimes.indiatimes.com