Source: Business Standard
Now, S&P Global Ratings has cut down its GDP growth forecast for India for the fiscal year 2025-26 by 20 basis to 6.3%, from its earlier 6.5%. The agency also lowered its estimate of GDP growth to 6.5% for the fiscal year 2026-27, a cut of 30 basis points. The revisions have been made against the backdrop of rising global uncertainties, especially those arising from trade tensions and tariff disputes with the United States.
Previously, the global rating agency had reduced India’s growth projections for 2025-26 to 6.5 per cent from 6.7 per cent.
The Reserve Bank of India (RBI) has also revised its growth forecast for FY26, lowering it to 6.5% from 6.7%, in response to growing concerns over external factors, particularly the ongoing tariff tensions with the U.S.
Key Factors Behind the Downward Revision
Impact of U.S. Tariffs and Trade Tensions
During the regime of the President Donald Trump term, USA have been stated without any flexibility in matters of reciprocity tariffs; tariffs touch to other countries around the world, including India. The U.S. announced an imposition of additional tariffs against India, said to be “fair trade” measures, with the most recent of those tariffs introduced currently: 26% on imports from India-one of which will hit hard on the major sectors vulnerable to trade exports, namely textiles-associated, gems, and jewelry. Though these tariffs are suspended for 90-days, India is negotiating with America for trade deals concerning these aspects.
Global Growth Adjustments
Revised growth projections from S&P Global reveal a wider pattern of lowering growth expectations across some of the larger economies in the world. In addition to India, the growth forecast for the United States, Canada, Mexico, Europe, Germany, Italy, the U.K., China, and Japan have been lowered. In particular, the U.S. is expected to see GDP growth lose roughly 60 basis points (bps) over 2025-2026, with very similar downgrades for Canada and Mexico. China’s growth is estimated to decrease by 0.7 percentage points, while reductions ranging from 0.2 to 0.4 percentage points have been predicted for Japan and India for the years 2025-2026.
The rating agency S&P argued this point through its Global Macro Update “A seismic shift in US trade policy has added to the uncertainty that has roiled markets and raised the specter of a global economic slowdown,” S&P has updated its macro view including forecasts of GDP growth and inflation, as well as recession odds, all designed to guide understanding of the prospective effects.
Expert Insights on the Economic Impact
Paul Gruenwald, S&P Global Ratings’ Chief Economist, remarked:
“The jump in US import tariffs, trading partner retaliation, ongoing concessions, and subsequent market turbulence constitute a shock to the system centered on confidence and market prices. The real economy is sure to follow, but by how much?”
“The jump in U.S. import tariffs, trading partner retaliation, ongoing concessions, and subsequent market turbulence constitute a shock to the system centered on confidence and market prices. The real economy is sure to follow, but by how much?”said S&P Global Ratings Global Chief Economist Paul Gruenwald.
In spite of there being recognition of downside growth risks skewed toward all regions, S&P has no material slowdown forecasted during growth. S&P added
“We do not foresee a US recession at this juncture,”
However, Gruenwald cautioned, “The risks to our baseline remain firmly on the downside in the form of a stronger-than-anticipated spillover from the tariff shock to the real economy. The longer-term configuration of the global economy, including the role of the U.S., is also less certain,” said Gruenwald.
