GDP: India not significantly affected by trade war, economy to grow 6.5% faster

New Delhi| Due to the tariff war, the risk of economies around the world falling into recession has increased. However, India will not be deeply affected by this trade war and the Indian economy will grow at a pace of 6.5 per cent in the new financial year 2025-26 starting from April 1. The economic growth rate may decline marginally to 6.3 per cent in 2026-27.

Fitch Ratings said in the March edition of the Global Economic Outlook (GEO), America’s aggressive trade policies have emerged as a major risk. This may bring India’s economic growth rate down slightly in 2026-27 compared to 2025-26. However, the Indian economy will survive the widespread impact of the trade war due to low dependence on external demand and adequate self-reliance.

The rating agency said, the growth rate of Indian GDP has improved due to increase in private and public expenditure including capital expenditure. It has increased from 5.4 percent in the third quarter of the current financial year 2024-25 to 6.2 percent in the fourth quarter. Agriculture sector also contributes to this growth. Kharif crop production has increased due to above average monsoon rains.

According to the Global Economic Outlook, the combination of strong growth in exports and decline in imports has supported GDP growth this year. The increase in net exports will also help the economy in 2025-26 and 2026-27.
Revision in tax slabs and increased tax-free income will increase consumer savings. This will boost expenditure and development.
Business confidence on top, capital expenditure will increase Fitch said, business confidence in India remains high. Surveys show that bank loans to the private sector will continue to grow by double digits.

The rating agency said, higher allocation of public capital expenditure in the Union Budget will support GDP.
Apart from these factors the reduction in interest rates by the RBI will reduce costs, which will accelerate capital spending in 2025-26 and 2026-27.

Repo rate will decrease twice more this year
With retail inflation falling to below four per cent in February, 2025, Fitch believes inflation will rise marginally to 4.3 per cent by December, 2026, as the RBI begins to cut the repo rate. It is expected that the repo rate will be cut twice more this year, reducing it from 6.25 per cent at present to 5.75 per cent by December, 2025.