IndiaN ECONOMY | Shift in President Trump’s trade policy roils markets 

FPJ News Service mumbai

S&P Global Ratings on Friday revised India's economic growth forecast for FY2025-26, trimming it by 0.2 percentage points to 6.3%. The revised forecast arises amid uncertainties surrounding the US tariff policy, and its potential spillover effects on the global economy. As far as the exchange rate fluctuations are concerned, the Rupee and US dollar pair is witnessing significant fluctuations since the US tariff announcement and the rupee is currently hovering at 84-level against the greenback.

In its economic research report, entitled, “Global macro update: seismic shift in US trade policy will slow world growth”, S&P global said, “A seismic and uncertain shift in US trade policy has roiled markets and raised the specter of a global economic slowdown. As a result, we have updated our macro view. 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? We have again lowered our GDP growth forecasts for most countries and raised our inflation forecast for the US. We see a material slowdown in growth, but do not foresee a US recession at this juncture. 

“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 US, is also less certain,” S& P said. “We reiterate that there are no winners in a scenario of escalating protectionist policies.” 

 S&P said among Asia-Pacific’s major economies, China is expected to see its growth drop by 0.7 percentage points in 2025 to 3.5% and in 2026 to 3%. S&P projected India’s GDP growth to be 6.5% in 2026-27 fiscal year. In March, the agency had lowered the FY26 GDP growth forecast to 6.5%, from 6.7%.   The US economy is expected to grow 1.5% per cent this year and 1.7% next year. 

The rating agency said the US tariff policy will fall into three buckets--China will be an individual case, reflecting the ongoing geopolitical rivalry, including long-standing tensions around the bilateral trade imbalance and “unfair competition.”  So far, the economic fallout from the tariff shock has been limited to drops in confidence indices and declines in nominal variables such as financial asset prices. It has yet to affect the real economy other than some front-running of imports to beat the tariffs.