Fitch Lowers India’s GDP Growth Forecast for FY26 to 6.3%

In its latest India Corporate Credit Trends Report released on August 1, 2025, global rating agency Fitch Ratings has revised India’s GDP growth projection for FY26 to 6.3%, slightly lower than its earlier estimate of 6.4%. The agency highlighted that while high infrastructure spending will continue to drive demand in core sectors, certain global trade challenges and tariff-related risks may weigh on India’s growth momentum.

Infrastructure Spending to Drive Demand

According to Fitch, India’s robust infrastructure push will remain a key growth engine. This is expected to support demand in crucial industries such as,

• Cement
• Power
• Petroleum products
• Construction
• Building materials

The report also noted that Indian firms’ credit metrics are likely to improve, backed by wider EBITDA margins despite heavy capital expenditure (capex) commitments.

Impact of US Tariffs on Indian Companies

• Fitch addressed concerns over the 25% tariffs announced by the United States, set to take effect from August 7, 2025, along with additional penalties linked to India’s trade with Russia.
• Limited direct impact: Most rated Indian companies have low to moderate exposure to US exports, shielding them from significant immediate losses.
• Second-order risks: However, Fitch cautioned that excess global supply of goods—particularly in steel and chemicals—could be redirected to India, creating pricing pressures and volatility for metals and mining firms.

Sectoral Outlook

IT, Auto, and Pharmaceuticals

Export-driven sectors such as IT services, auto components, and pharmaceuticals may face challenges. Tariff uncertainty in the US and Europe could reduce demand. Policy shifts in the US may particularly affect Indian pharmaceutical exports, a sector heavily reliant on overseas markets.

Relatively Insulated Sectors

On the other hand, some industries are expected to remain stable and resilient, including,

• Telecom
• Oil and Gas
• Utilities
• Construction

These sectors are largely domestic demand-driven and benefit from regulatory stability, minimizing external risks.

India Pushes Back in Trade Talks

The report highlighted that India has strongly resisted US demands for duty concessions in agriculture and dairy, sectors that remain excluded from all existing free trade agreements (FTAs). The ongoing negotiations could influence how Indian companies diversify their exports and adapt to changing trade dynamics. Fitch emphasized that the outcome of these talks may play a crucial role in determining the resilience of India’s external sector in the near future.