S&P lowers India's growth forecast, second time in two months over US tariff uncertainties

New Delhi [India], May 2 : S&P Global Ratings has lowered India's GDP forecast for 2025-26 by 20 basis points to 6.3 per cent, and by 30 basis points to 6.5 per cent for 2026-27.

Previously, the global rating agency had reduced India's growth projections for 2025-26 to 6.5 per cent from 6.7 per cent.

The Reserve Bank of India also recently lowered the growth forecast for the current fiscal 2025-26 to 6.5 per cent from 6.7 per cent, amid uncertainties arising from trade worries following the reciprocal tariffs announced by the US.

Since assuming office for his second term, President Donald Trump has reiterated his stance on tariff reciprocity, emphasising that the United States will match tariffs imposed by other countries, including India, to ensure what he termed "fair trade". The tariffs have been kept in abeyance for 90 days, as several countries have reached out to the US administration for a trade deal.

Along with India, S&P today lowered growth projections several other large countries - the US, Canada, Europe, Germant, Italy, the UK, China, Japan, among others.

US GDP growth expected to fall by about 60 basis points (bps) over 2025-2026, while Canada's and Mexico's GDP growth falls by a similar amount.

In Asia-Pacific's major economies, China sees growth drop by 0.7 percentage points in 2025-2026, while Japan and India see a reduction of 0.2-0.4 percentage points.

"A seismic shift in US trade policy has added to the uncertainty that has roiled markets and raised the specter of a global economic slowdown," S&P argued in its Global Macro Update.

To help understand the potential effects, S&P has updated its macro view, including GDP growth and inflation forecasts and chances of a recession.

"The jump in US import tariffs, trading partner retaliation, ongoing concessions, and subsequent market turbulence constitute a shock to the system centered on confidence and market prices. The real economy is sure to follow, but by how much?" said S&P Global Ratings Global Chief Economist Paul Gruenwald.

While there are increased risk to the downside across all regions but S&P does not anticipate a material slowdown in growth.

"We do not foresee a US recession at this juncture," it said.

"The risks to our baseline remain firmly on the downside in the form of a stronger-than-anticipated spillover from the tariff shock to the real economy. The longer-term configuration of the global economy, including the role of the U.S., is also less certain," said Gruenwald.

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