NEW DELHI: Â S&P Global Ratings has trimmed India growth forecast – GDP, for the fiscal year 2025-26 to 6.5 per cent, down from its earlier projection of 6.7 per cent, citing global trade tensions and rising US tariffs as key risks for the Asia-Pacific region.
Despite these external headwinds, the agency expects India’s domestic demand to remain strong, supported by easing food inflation, lower borrowing costs, and tax benefits announced in the Union Budget. The forecast assumes a normal monsoon and relatively soft commodity prices, particularly crude oil.
S&P also projects that the Reserve Bank of India (RBI) will continue easing monetary policy, with rate cuts of 75-100 basis points expected in the current cycle, bringing inflation closer to the central bank’s 4% target.
US tariffs
On the global front, S&P warns that rising US tariffs and a broader retreat from globalization are likely to strain economic growth in Asia-Pacific. The US has imposed additional levies, including a 20 pr centtariff on Chinese imports, 25 per cent tariffs on select goods from Canada and Mexico, and a global 25 per cent duty on steel and aluminum. Plans for further tariffs on automobiles, semiconductors, and pharmaceuticals add to the uncertainty.
With trade tensions weighing on investment sentiment, S&P now expects the US Federal Reserve to implement only one rate cut in 2025, followed by three in 2026. The agency noted that policy shifts under the new US administration, including deregulation, tax cuts, and fiscal tightening, could further impact global economic dynamics.
Despite these challenges, S&P remains optimistic about the resilience of emerging markets in the Asia-Pacific region, with domestic demand helping offset external pressures.
