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Not with standing the heavy tariffs being imposed by US, India is likely to remain one of fastest-growing emerging market economies in Asia through this decade, according to BMI, a Fitch Solution Company. The research firm also said that the Next-gen GST reforms, aimed to boost private consumption and cutting rates, could help offset the US tariff impact.
BMI said that India’s GDP is projected to hold above 6 per cent, even when US’ additional tariffs would have a detrimental effect on certain industries, BMI said.
The BMI forecasted India’s economic growth to steadily slow to just above 6.0 per cent by the decade’s end, slightly below the 2010-2019 pre-pandemic average of 6.5 per cent, yet still positioning India among Asia’s fastest-growing economies.
Productivity is also estimated to rise around 5 per cent through the decade.
We previously estimated that a 25-percentage point increase in the ‘reciprocal’ tariff would slow real GDP growth in FY2025/26 (April-March) and FY2026/27 by a further 0.2 per cent. As such, we have revised down our forecasts accordingly and now expect the economy to expand by 5.8 per cent in FY2025/26 and 5.4 per cent in FY2026/27, it said.
Regarding the GST reforms, BMI said the reforms could cancel out the stress on growth due to the tariffs. The GST slab rationalization into a simpler two-slab structure is expected to spur consumption and improve margins across various sectors.
Meanwhile, Fitch Ratings affirmed India’s sovereign rating at ‘BBB-‘ with a stable outlook, stating that the US tariffs are likely to have limited effect on the nation’s growth rate.
