Sharing is caring!
Fitch lifts 2025 global growth aim with a worrying rider, upgrades India forecast to 6.9% for FY26.
Fitch Ratings anticipates global growth deceleration, yet India is projected to maintain a growth rate above 6% for the next three years.
While the global growth forecast for 2025 has been slightly raised, driven by China and the Eurozone, the US economy is showing signs of a slowdown.
Fitch has nudged up its 2025 global growth forecast to 2.4% from 2.2% on the back of stronger data from China and the eurozone, but warned that clear signs of a slowdown in the US remain a drag. Against this backdrop, India stood out: the agency upgraded its FY26 growth forecast to 6.9%, up from its earlier estimate of 6.5%. The upgrade follows a stronger-than-expected performance in the second quarter of 2025, when real GDP jumped 7.8% year-on-year, far above Fitch’s projection of 6.7%.
Global Growth Outlook Adjusted Upward
2025 Global GDP Growth Forecast: Fitch has raised its projection from 2.2% to 2.4%, citing stronger-than-expected performance in both China and the eurozone.
Caveat: Despite this upward revision, Fitch sounded a cautionary note about the continuing slowdown in the U.S., suggesting that developments there could drag down global momentum.
India: A Bright Spot in the Global Outlook
Growth Forecast Upgrade
Fitch upgraded India’s growth forecast for fiscal year 2025–26 (FY26) from 6.5% to 6.9%, marking one of the most optimistic projections among major agencies.
Drivers Behind the Upgrade
India recorded a robust real GDP growth of 7.8% year-on-year in Q2 (April–June 2025), outperforming the prior forecast of 6.7%. This acceleration was largely driven by:
Surging services activity
Resilient private consumption supported by strong real incomes and improved financial conditions .
Risks and Caveats (“The Worrying Rider”)
Escalating U.S. Trade Tensions: The U.S. recently imposed additional tariffs (up to ~50%) on Indian goods, with Fitch warning these could undermine business confidence and dampen investment unless tariff levels are negotiated down.
Real vs. Nominal GDP Gaps: Fitch noted a narrowing gap between nominal and real GDP growth, indicating that real GDP figures might be somewhat overstated due to currently low wholesale and commodity prices. If price pressures return, the economic reality could shift.
Inflation & Monetary Policy Outlook
Inflation Metrics:
Headline retail inflation in India was just 1.6% in July, the lowest since mid-2017, helped by prosperous monsoons and falling food prices.
Core inflation dipped below 4% for the first time in six months.
Monetary Policy Expectations:
Fitch forecasts a 25 basis point rate cut by the Reserve Bank of India (RBI) later in 2025.
Following that, rates are expected to remain stable through 2026, with tightening possible in 2027.
Medium-Term Outlook:
Following FY26’s projected growth of 6.9%, Fitch expects:
6.3% growth in FY27
6.2% growth in FY28
It also projects that India will likely maintain growth above 6% through FY28, underscoring the country’s resilience amidst broader global uncertainty.
Final Takeaway:
Fitch’s latest update brings a dual narrative: global optimism tempered by caution, and for India, a notably optimistic growth outlook—tempered by external risks and structural caveats. The upgrade reflects a strong domestic performance fuelled by consumption and services, while the “worrying rider” underscores lingering macroeconomic vulnerabilities in a volatile global environment.
Hello!
This post was created with XRumer 23 StrongAI.
Good luck 🙂