The Indian economy is consistently receiving positive news from abroad, even as America imposes a high tariff of 50%. This heavy tariff seems powerless against the economy's rapid pace. Recently, Fitch Ratings increased India's GDP growth estimate. Now, the Organization for Economic Cooperation and Development (OECD) has uplifted India's growth forecast for the current financial year, with a significant hike of 40 basis points from previous estimates.
The Economy to Surge by 6.7%
OECD, based in Paris, France, has unexpectedly accelerated India's growth rate forecast for the current fiscal year by 40 basis points, from the previous 6.3% to a remarkable 6.7%. According to the report, this substantial upgrade in forecast is attributed to the GST reforms implemented by the Modi government, which have made essential goods, TV-AVs, cars, bikes, and various other products more affordable nationwide.
In its interim outlook released on Tuesday, the OECD noted that while Trump's tariffs will put pressure on India's export sector, the overall reforms in GST and rate cuts, coupled with flexible monetary and fiscal strategies, are expected to support various economic activities. However, for the next fiscal year FY27, OECD has cut its forecast by 20 basis points, bringing it down to 6.2%.
S&P's Continued Confidence in India
Not only OECD, but global rating agency S&P also retains its faith in India, maintaining the current fiscal year's growth estimate at 6.5% despite the high tariffs. The agency highlighted that domestic demand would remain strong, backed by the government's various initiatives, including the GST cuts.
The global agency further reduced the inflation forecast for the current fiscal year to 3.2% due to a sharp decline in food inflation in India. Additionally, the agency anticipates a significant cut in the repo rate this year, suggesting that the Reserve Bank of India could reduce interest rates by 25 basis points. Notably, RBI had previously reduced the repo rate by a total of 100 basis points over three consecutive decisions, though it maintained the rate at 5.5% last August.
Fitch's Bullish Stance on India
Before OECD and S&P, American rating agency Fitch Ratings had also dismissed the effect of Donald Trump's 50% tariffs, forecasting the continuation of the Indian economy's fast pace. Early September, Fitch's report brought good news for India by elevating the economic growth forecast for FY26 to 6.9% from an earlier 6.5%. Even after Trump's double tariffs, the agency made a vigorous 40 basis points hike in its previous projection.
