Fitch projects GDP at 6.9%, says US tariffs to be negotiated lower, GST to boost spending

New Delhi (TIP)- Fitch Rating on Sept 10 raised India’s GDP (gross domestic product) forecast for the financial year 2025-26 to 6.9 per cent from 6.5 per cent.
The global rating agency said domestic demand will be the key driver of growth, as strong real income dynamics support consumer spending and looser financial conditions should feed through to investment.
Fitch said that at the global level, the GDP will slow significantly this year, with the global growth forecast to be 2.4 per cent in 2025, up 0.2 percentage points (pp) since June. However, there is a sizable slowdown from 2.9 per cent last year and below the trend.
World growth for 2026 is edged up by 0.1 pp to 2.3 per cent.
For India, the rating agency further said, at the same time, ”annual growth will slow in the second half of the financial year, and so we expect growth to slow in FY27 to 6.3 per cent”.
“With the economy operating slightly above its potential, we expect growth will edge down to 6.2 per cent in FY28.”
For China, Fitch revised the country’s GDP to 4.7 per cent from 4.2 per cent, the Eurozone’s to 1.1 per cent from 0.8 per cent, and the US to 1.6 per cent from 1.5 per cent.
Highlighting the impact of US tariffs and GST, Fitch believes that the US tariffs on India will eventually be negotiated lower, but the uncertainty around trade relations will dampen business sentiment and potentially investment.
However, the reforms to the Goods and Services Tax (GST) to be effective from 22 September, it said, should modestly boost consumer spending over the remainder of this and the next fiscal years.
“We expect food price pressures will remain weak in the context of above-average monsoon rainfall and high food stockpiles, so that inflation will only pick up to 3.2 per cent by end-2025 and 4.1 per cent by end-2026. We still expect the Reserve Bank of India (RBI) to cut rates by 25 basis points (bp) towards the end of the year, as it assesses the impact of the policy loosening already implemented, and that rates will stay there until the end of 2026. We expect the RBI to start raising rates in 2027,” Fitch said.