Fitch Ratings has slightly reduced India’s GDP growth forecast for the fiscal year ending March 2026 to 6.3%, down from its earlier projection of 6.4%.
The rating agency believes that, despite global headwinds, credit metrics for Fitch-rated Indian companies are likely to improve in FY26. This optimism is driven by wider EBITDA margins, which could offset the impact of high capital expenditure (capex) by many corporates.
Impact of US Tariffs on Indian Corporates
Limited Direct Fallout
Fitch expects only a limited direct impact on Indian corporates from the new US tariffs, as India’s export exposure to the US is generally low to moderate.
However, it also warned of second-order effects, such as excess global supply of certain goods being redirected to India, potentially affecting domestic pricing.
Details of the US Tariff Move
US President Donald Trump recently announced:
- A 25% tariff on Indian imports to the US.
- An additional penalty linked to India’s trade with Russia.
These tariffs are set to take effect from August 7.
India’s Response in Trade Talks
India has taken a firm stance in ongoing bilateral trade negotiations with the US.
- The country is resisting US pressure to grant duty concessions on agricultural and dairy products.
- Historically, India has never offered such concessions under any Free Trade Agreement (FTA), and it is unwilling to break this precedent.
Sector-Wise Impact Analysis
Industries Likely to Stay Resilient
Sectors focused on domestic demand are expected to remain largely unaffected. These include:
- Oil and Gas
- Cement
- Construction
- Telecom
- Utilities
Stable local demand and regulatory support should protect them from global trade tensions.
Sectors Facing Potential Pressure
Some sectors may see more uncertainty:
- Information Technology (IT) and Automobile Exports:
Could face weaker demand from the US and Europe, especially for discretionary spending products and services. - Pharmaceutical Exports:
May be affected if US policy changes alter market access conditions. - Steel and Chemicals:
Could see pricing pressure if excess global supply is diverted to India. - Metals and Mining:
Might face price volatility due to broader global growth concerns.