FPJ News Service mumbai

S&P Global Ratings on Monday retained the growth forecast for India at 6.5% for FY 25-26. The spike in the effective US tariff on India is weighing on the expansion of export-oriented manufacturing in the country. But there are signs the US may lower tariffs on Indian products.

“We anticipate that India’s GDP will grow by 6.5% in fiscal year 2026 (ending March 2026) and 6.7% in fiscal 2027, with risks evenly balanced. Domestic growth remains robust, driven by strong consumption, despite the impact of US tariffs,” S&P said in a statement.

“We have reduced our CPI inflation forecast to 2.5% for the current fiscal year, as food inflation remains lower than we anticipated. However, we expect food inflation to normalize and forecast about 5% headline inflation the next fiscal year.

“If India can secure a trade agreement with the US, it will reduce uncertainty and enhance confidence, which would boost labor-intensive sectors. In India, capital outflows have contributed to currency weakness. Added uncertainty from unexpectedly high US tariffs and the lack of a trade deal with the US have further squeezed the rupee,” S&P noted.

Global conditions are still shifting. Even so, “we think a tentative thaw in US-China ties and, in many economies, resilient domestic demand should help Asia-Pacific growth hold up in 2026. We anticipate central banks will have little room to cut further as rates return to more neutral territory and currencies remain under pressure,” the international rating agency said.

The global economy has so far held up in the face of US tariff increases and the uncertainty about them. Global activity has derived support from tailwinds such as AI investment and tech-related spending, especially in the US, and lower inflation and interest rates.

“Still, we expect higher trade restrictions and industrial policy to weigh on trade, investment, and growth in coming years. “Tariffs are causing US inflation to rise, and US unemployment remains low. But economic growth and job creation have softened. We expect the US Fed to stage three more 25 bps rate cuts through to end-2026, taking the rate to 3%-3.25%,” S&P said.