S&P cuts India’s growth forecast to 6.5% in 2025-26
Report
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The S&P Global has revised its forecast for India's real gross domestic product (GDP) growth in the financial year 2025-26 to 6.5 % from its earlier projection of 6.7 %. The global credit rating agency S&P Global forecasted the growth rate of the economies of the Asia Pacific Region (APAC) in its latest report released on 25th March 2025.
The report was prepared taking into account the possible impact of the reciprocal tariffs threatened by the Donald Trump administration of the United States of America on its trading partners.
According to the National Statistical Office, the growth rate of the real gross domestic product (GDP) of India in 2024-25 was 6.4%.
In its latest monetary policy of February 2025, the Reserve Bank of India has forecasted a growth rate of 6.7 % for the Indian economy in 2025-26.
External Factors and their impact on India’s growth rate
The S&P Global has cited external pressures, including rising US trade tariffs and a pushback against globalisation, as key factors contributing to the downward revision of the Indian economic growth rate.
Since coming to power, the American President Donald Trump has imposed high tariffs on Mexican, Canadian, and Chinese goods being imported to the United States of America.
Donald Trump complains that these countries have imposed high tariffs on American goods, which has led to a huge American trade deficit with its trading partners.
He has also threatened to impose tariffs on Indian goods being exported to the United States of America.
It also expects the global growth rate to slow down due to trade disputes as a result of Donald Trump's tariff hikes.
The report takes into account the expected US tariff on Indian goods that has lowered the growth rate of India to 6.5% in 2025- 26.
Strength of the Indian Economy
The report expects the impact of the United States' tariff hike to affect goods rather than services.
India, with a robust service export sector, is not likely to be affected by the American tariffs.
The report also expects the monsoon to be normal and the oil price to be stable.
The Income tax exemption up to Rs 12 lakhs per annum announced in the union budget 2025-26 will also boost the spending by consumers. It will support the growth rate of the Indian economy.
Impact on the Asia Pacific Economies
- The report suggests that if Donald Trump implements his reciprocal tariff policies on trade partners, the most affected country will be China, which is the largest exporter of merchandise goods in the world.
- It will also adversely impact the growth rate of Malaysia (because of semiconductors), Singapore (due to pharmaceutical products), and South Korea (because of automobiles).
Also Read:
UN report: Indian economy to grow 6.6% in 2025, 6.7% in 2026
