Fitch cuts India growth estimates by 10 bps to 6.4% amid escalations in global trade war

Fitch also cut the world growth projections in 2025 by 0.4 percentage points and China and U.S. growth by 0.5 percentage points from its March GEO.
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Fitch Ratings on Thursday (April 17, 2025) cut India’s GDP growth estimate by 10 basis points to 6.4% for the current fiscal, but retained the projections for the next financial year, on concerns over a ‘severe’ escalation in global trade war.

“It is hard to predict U.S. trade policy with any confidence. Massive policy uncertainty is hurting business investment prospects, equity price falls are reducing household wealth, and U.S. exporters will be hit by retaliation,” Fitch said in its special update to quarterly Global Economic Outlook (GEO).

Also read: Examining implications of U.S. reciprocal tariffs on India: Commerce Ministry

Fitch also cut the world growth projections in 2025 by 0.4 percentage points and China and U.S. growth by 0.5 percentage points from its March GEO.

“Fitch Ratings’ forecasts for world growth have been sharply lowered in response to the recent severe escalation in the global trade war. World growth is projected to fall below 2% this year; excluding the pandemic, this would be the weakest global growth rate since 2009,” it said.

With regard to India, Fitch cut GDP growth estimates for both the 2024-25 fiscal and the current 2025-26 fiscal by 10 basis points to 6.2% and 6.4%, respectively. For the 2026-27 fiscal year, growth has been retained at 6.3%.

The GDP growth rate of the United States is expected to remain positive at 1.2% for 2025. China’s growth is expected to fall below 4% both this year and next, while growth in the eurozone will remain stuck well below 1%, as per Fitch projections.

It said the U.S. ‘Liberation Day’ tariff hikes were far worse than expected.

While subsequently paused and replaced with a near-universal 10% rate for 90 days, the shock prompted several rounds of retaliatory moves between China and the U.S., taking bilateral tariff rates over 100%.

The U.S. average effective tariff rate (ETR) has risen to 23%, the highest since 1909 and well above the 18% Fitch assumed in March. Fitch now assumes the U.S. ETR on China will remain above 100% for some time before falling back to 60% in 2026.

“For now, we stick with our March assumption of a 15% U.S. ETR on other trade partners,” Fitch added.