'Limited direct impact from US tariffs': Fitch revises India GDP forecast to 6.3% for FY26; infrastructure spending, local demand seen supporting key sectors

Fitch Ratings has revised India’s GDP growth projection for the current financial year down to 6.3%, from its earlier estimate of 6.4%, while stating that the recently announced US tariffs are likely to have only a limited direct effect on Indian corporates.In its latest India Corporates Credit Trends report released Friday, the global rating agency said it expects robust infrastructure spending to sustain demand across core sectors, PTI reported.“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,” Fitch noted.The revised forecast comes months after the agency projected 6.4% GDP growth in its Global Economic Outlook report published in April.Despite the macroeconomic adjustment, Fitch anticipates credit metrics for rated Indian corporates to improve in FY26. Wider EBITDA margins are expected to offset the effects of high capital expenditure, it added.On the impact of the 25% US tariffs recently announced by President Donald Trump—along with a penalty targeting Indian trade ties with Russia—Fitch said the direct impact on rated Indian corporates would likely remain limited, owing to low-to-moderate exposure to US exports.

However, the report cautioned about potential “second-order risks” arising from global excess supply. Fitch also noted that an eventual India-US trade agreement may alter outcomes, and companies are likely to explore export diversification to mitigate the tariff shock.India and the US are in the midst of negotiations for a bilateral trade deal. According to reports, New Delhi has taken a firm stance against Washington’s demand for duty concessions on agriculture and dairy products—sectors where India has traditionally offered no preferential tariffs in any FTA.Fitch said that sectors focused on the domestic market—such as upstream and downstream oil & gas, cement and building materials, telecom, utilities, and engineering and construction—should see minimal tariff-related disruptions due to strong local demand and regulatory insulation.In contrast, Fitch highlighted that tariff uncertainty may dampen discretionary exports in IT services and automotive components to the US and Europe during FY26. Pharmaceuticals could also be vulnerable to policy changes from the US side.Additionally, the report said that steel and chemicals may face pricing pressure from oversupplied global markets, while the metals and mining sector could experience higher price volatility due to emerging global growth risks.