Fitch Says U.S. Tariffs Will Have Limited Impact on India, Retains BBB- Credit Rating
Global rating agency Fitch has said that U.S. tariffs will have only a limited impact on the Indian economy and could eventually be reduced. The agency has maintained India’s sovereign credit rating at BBB-, supported by the country’s strong economic growth and overall stability. Fitch also projected India’s GDP growth at 6.5% in FY26, the same level as FY25.
According to Fitch, while India continues to demonstrate resilience, rising fiscal deficits and high public debt remain areas of concern and could weaken the credit profile over time. Notably, BBB- is considered the lowest “investment grade” rating, indicating that India’s debt repayment capacity is adequate, though risks exist. A rating one notch higher at BBB reflects lower risk and higher investor confidence.
On U.S. tariffs, Fitch noted that exports to the U.S. account for just 2% of India’s GDP, meaning the direct impact of increased tariffs would be moderate. However, it cautioned that uncertainties surrounding tariff policies could affect investor sentiment and dampen capital inflows. The agency added that while former U.S. President Donald Trump plans to impose a 50% tariff on Indian goods by August 27, it is likely that the final tariffs will be reduced.
Meanwhile, S&P Global Ratings upgraded India’s long-term sovereign credit rating from BBB- to BBB while keeping the outlook stable. S&P highlighted that India’s economic fundamentals remain strong, the government has made efforts to control spending, and growth momentum continues, which collectively support the upgrade. The higher rating is expected to boost investor confidence, make foreign borrowing easier and cheaper for India, and signal that the country is moving steadily in the right economic direction.
In addition, the World Bank has kept its growth forecast for India at 6.3% for FY25-26, slightly lower than last year’s 6.5%. The bank had revised its earlier projection in April 2025 from 6.7% down to 6.3% due to global headwinds but maintained that India would remain the fastest-growing major economy in the world. For FY26-27, the World Bank estimates India’s growth rate at 6.5%, further underscoring the nation’s economic resilience and long-term prospects.
Overall, experts believe that while U.S. tariff uncertainties pose short-term challenges, India’s robust growth fundamentals, improving credit profile, and global investor confidence will help cushion any potential shocks. The combination of Fitch’s stable outlook, S&P’s rating upgrade, and the World Bank’s growth forecast reflects confidence in India’s economic trajectory despite external risks.
