The growth forecast for fiscal 25 has also fallen by 10 basis points to 6.2%.
The United States has imposed high tariffs on several countries, including India, and China is more than 100%.
These measures are currently at a 90-day pause, during which the general tariff rate in economies is about 10%. India’s net trade contribution is expected to fall from 1.7 percentage points in FY25 to 0.6 percentage points in FY26, reflecting the impact of global trade disruptions.
Global GDP growth is now 1.9%, down from 2.3% compared to the previous 2.3%.
“World growth is expected to be below 2% this year; excluding the pandemic, it will be the weakest growth rate worldwide since 2009,” the report said.
The U.S. economy is expected to drop from 2.8% in 2024 to 1.2% in 2025, under pressure from policy uncertainty, stock price declines and potential trade retaliation.
The agency said it expects U.S. inflation to rise to 4.3% from 2.9% the previous year.
China’s economic growth is expected to drop from 5% in 2024 to 3.9%. Net trade accounts for one-third of the country’s GDP growth.
Despite challenges for exporters in redirecting sales in China, Fitch Ratings expects fiscal and monetary policies to relieve some of the pressure.
It added: “In the next 18 months, including tax cuts, some U.S. tariff revenue will also be recycled.”
In India, growth in consumer spending is expected to decrease to 2.4% in FY26, while the 2.4% growth rate drops to 2.4% from 7% in FY25.
Retail inflation fell to a 67-month low of 3.3% in March, according to official data released earlier this week.
Rating agencies predict that India’s inflation rate will rise from 3.9% in 2025 to 4.5% in 2026.
