Fitch cuts India’s FY26 growth forecast to 6.3%, flags limited tariff impact

Fitch Ratings on Friday revised its GDP growth estimate for India to 6.3% for the financial year ending March 2026, down from its earlier projection of 6.4% made in April. The credit rating agency, however, said it sees a limited direct impact on Indian corporates from the higher tariffs imposed by the United States.

In its latest India Corporates Credit Trends report, Fitch said the modest downgrade in growth expectations still reflects strong momentum in infrastructure spending, which should continue to fuel demand for core sectors.

“We expect India’s GDP growth of 6.3 per cent and robust infrastructure spending to underpin healthy demand for cement and building materials, electricity, petroleum products, steel, and engineering and construction (E&C) companies during FY26,” the report said.


Fitch also expects credit metrics to improve for rated Indian companies, driven by stronger EBITDA margins despite ongoing capital expenditure.

On the US trade front, Fitch noted that most of the Indian firms it rates have “generally low to moderate US export exposure,” which should shield them from any significant direct fallout of the new US tariffs.

US President Donald Trump has announced 25% tariffs on Indian goods, along with an additional penalty for India’s trade engagement with Russia. These tariffs are set to kick in from August 7.

While the direct impact may be muted, Fitch cautioned that “second-order risks from excess supply could arise in some cases.” It also pointed to the possibility of Indian companies adjusting by “diversifying exports” depending on the outcome of ongoing India-US trade negotiations.

India has been resisting US demands to lower duties on agricultural and dairy products as part of a potential bilateral trade deal. Notably, New Delhi has never offered duty concessions to any partner in the dairy segment under existing free trade agreements.

Domestically focused sectors like oil and gas (both upstream and downstream), cement, building materials, engineering and construction, telecom, and utilities are expected to remain largely insulated, Fitch said, supported by “local demand and/or regulatory stability.”

That said, the report flagged possible headwinds in export-dependent sectors. Discretionary IT and auto component exports to the US and Europe could be curbed by tariff uncertainty, while shifting US policy could pose new risks to Indian pharmaceutical firms.

In steel and chemicals, Fitch warned of potential price pressures due to global oversupply being redirected to India. Metals and mining, too, may face “greater price volatility amid growth risks,” the report added.

With inputs from PTI