Fitch Ratings has nudged up its 2025 global growth forecast to 2.4% from 2.2% on the back of stronger data from China and the eurozone, but warned that clear signs of a slowdown in the US remain a drag. Against this backdrop, India stood out: the agency upgraded its FY26 growth forecast to 6.9%, up from its earlier estimate of 6.5%. The upgrade follows a stronger-than-expected performance in the second quarter of 2025, when real GDP jumped 7.8% year-on-year, far above Fitch’s projection of 6.7%.
“On the back of the 2Q25 outturn, Fitch has revised up its forecast for the fiscal year ending March 2026 (FY26) to 6.9% from 6.5% in the June GEO,” the agency said in its September Global Economic Outlook released Wednesday. It flagged domestic demand as the main growth driver, with strong real incomes supporting consumption and looser financial conditions fuelling investment.
Still, the pace is expected to moderate. Fitch sees growth slowing to 6.3% in FY27 and 6.2% in FY28 as the economy runs slightly above potential.
Services power growth
India’s latest spurt was led by a 9.3% year-on-year surge in services, supported by resilient private and public spending. Fitch cautioned that a weak GDP deflator, the lowest since 2019, may have flattered the real GDP number, but upbeat indicators like robust PMI readings and rising industrial output point to underlying momentum.
Inflation and RBI outlook
Inflation has cooled sharply. Headline inflation fell to 1.6% in July, the lowest since June 2017, while core inflation slipped below 4% for the first time in six months. Fitch credited a strong monsoon and ample food reserves for easing food prices. It expects inflation to edge back up, reaching 3.2% by end-2025 and 4.1% by end-2026.
Despite the disinflation, Fitch does not expect aggressive moves from the Reserve Bank of India. It projects a single 25-basis-point cut later this year, with rates held steady through 2026 before tightening begins in 2027.
Global backdrop
Globally, Fitch nudged its 2025 growth forecast to 2.4% from 2.2% in June, helped by stronger data from China and the eurozone. But the figure is still weaker than last year’s 2.9% expansion. China’s growth forecast has been lifted to 4.7% (from 4.2%), the eurozone’s to 1.1% (from 0.8%), while the US is seen slowing to 1.6% (from 1.5%). For 2026, global growth is projected at 2.3%.
The drag comes largely from the US. Fitch said evidence of a slowdown is now clear in hard data, not just sentiment surveys. Tariffs are also weighing on the global picture, with the effective US rate at around 16%. Mexico and Canada face lighter levies under USMCA compliance, while Asia outside China is being hit harder.
“Greater clarity about US tariff hikes does not alter the fact that they are huge and will reduce global growth,” said Brian Coulton, Fitch’s chief economist.
The tariff shock has yet to feed through fully to consumer inflation, but Fitch expects pressures to rise in late 2025, eroding real wages and weakening demand. Job growth is already slowing, worsened by tighter immigration policies. Even with fiscal spending providing some cushion in 2026, US growth is expected to remain stuck at 1.6%. Fitch sees the Federal Reserve cutting rates twice this year and three more times in 2026.
“On the back of the 2Q25 outturn, Fitch has revised up its forecast for the fiscal year ending March 2026 (FY26) to 6.9% from 6.5% in the June GEO,” the agency said in its September Global Economic Outlook released Wednesday. It flagged domestic demand as the main growth driver, with strong real incomes supporting consumption and looser financial conditions fuelling investment.
Still, the pace is expected to moderate. Fitch sees growth slowing to 6.3% in FY27 and 6.2% in FY28 as the economy runs slightly above potential.
Services power growth
India’s latest spurt was led by a 9.3% year-on-year surge in services, supported by resilient private and public spending. Fitch cautioned that a weak GDP deflator, the lowest since 2019, may have flattered the real GDP number, but upbeat indicators like robust PMI readings and rising industrial output point to underlying momentum.
Inflation and RBI outlook
Inflation has cooled sharply. Headline inflation fell to 1.6% in July, the lowest since June 2017, while core inflation slipped below 4% for the first time in six months. Fitch credited a strong monsoon and ample food reserves for easing food prices. It expects inflation to edge back up, reaching 3.2% by end-2025 and 4.1% by end-2026.
Despite the disinflation, Fitch does not expect aggressive moves from the Reserve Bank of India. It projects a single 25-basis-point cut later this year, with rates held steady through 2026 before tightening begins in 2027.
Global backdrop
Globally, Fitch nudged its 2025 growth forecast to 2.4% from 2.2% in June, helped by stronger data from China and the eurozone. But the figure is still weaker than last year’s 2.9% expansion. China’s growth forecast has been lifted to 4.7% (from 4.2%), the eurozone’s to 1.1% (from 0.8%), while the US is seen slowing to 1.6% (from 1.5%). For 2026, global growth is projected at 2.3%.
The drag comes largely from the US. Fitch said evidence of a slowdown is now clear in hard data, not just sentiment surveys. Tariffs are also weighing on the global picture, with the effective US rate at around 16%. Mexico and Canada face lighter levies under USMCA compliance, while Asia outside China is being hit harder.
“Greater clarity about US tariff hikes does not alter the fact that they are huge and will reduce global growth,” said Brian Coulton, Fitch’s chief economist.
The tariff shock has yet to feed through fully to consumer inflation, but Fitch expects pressures to rise in late 2025, eroding real wages and weakening demand. Job growth is already slowing, worsened by tighter immigration policies. Even with fiscal spending providing some cushion in 2026, US growth is expected to remain stuck at 1.6%. Fitch sees the Federal Reserve cutting rates twice this year and three more times in 2026.
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