UBS has reduced India’s FY26 GDP growth forecast to 6% of 6.3% due to global wind wind and a US tariff. The bank warns about possible export impacts, but expects domestic consumption to provide support amid inflation and improving rural demand. UBS cuts India’s FY26 GDP forecast to 6% amid the US tariff increase and global growth -kommer. UBS revised India’s real GDP growth forecast for FY26 to 6 percent from its earlier projection of 6.3 percent, citing the increasing global, the introduction of a 27 percent reciprocal rates by the United States. Global demand and the possibility of extensive trading friction with key partners such as the US and China. The GDP cuts reflect global uncertainty, tariff impact UBS said the latest cut in India’s FY26 growth prospects in the economic draw of the newly implemented US rates and a broader global slowdown. It has already accepted a 25-base mark in its earlier estimates, but revised it lower, given the latest developments. Although the domestic economy is expected to receive support from improving rural demand and urban stability, UBS has warned that private corporate capital expenditure can see delays as a result of a subdued sentiment and concern over China falling excess capacity in world markets, including India. “The export of goods from India can take a significant hit due to weaker global growth. Our base forecast assumes that India can provide more tariff cuts on US imports and increase the purchases of US goods, including energy and defense equipment at the expense of Russia,” UBS said in the report. Domestic demand is likely to have the shot of cushion, despite the external shocks, UBS claims that domestic consumption is likely to remain a power pillar. The broker expects cyclic rural recovery, aided by favorable crop prospects, and the relief of inflation to support consumption. UBS also emphasized that urban demand is likely to support the expected rate cuts and falling fuel prices. However, the firm has labeled a probable setback on the export of goods from India in the midst of global trade. UBS sees more room for monetary relief according to UBS, India’s domestic growthomentum can benefit from further policy interventions. The firm believes the relief cycle by the Reserve Bank of India can now be deeper, and predict the rate cut of up to 125 basis points in this cycle compared to the earlier estimate of 75 basis points. UBS expects inflation in FY26 to 4 percent to be moderate, supported by lower global crude prices and cheaper Chinese goods entering India. It urged the central government to stick to its FY26 CapeX targets and consider reducing retail fuel prices to support household purchase power. Tariff negotiations with us an important Watchpoint UBS noted that India’s current approach to continuing a balanced trade agreement with the United States, instead of choosing immediately, can work in its favor. According to media reports quoting UBS, the two countries can arrive at a revised trade agreement by the end of the year. Meanwhile, discussions are expected to focus on tariff reductions on key sectors such as agriculture, energy, cars, electronics and textiles, which collectively make up about 50 percent of India’s exports to the US. Global growth and trade are facing broader risks that UBS has further warned that the unexpected high US rates could lower global trading volumes by as much as 7.5 percentage points. This emphasized that its US economy team 2025 reduced GDP growth projections for the US from 1.6 percent to 0.4 percent. The Asia economy team also sees significant ripple effects, and expects Chinese exports to drop by 5 percentage points and China GDP by 1.5 percentage points. Asean-5 economies can also see a 0.7 percentage point hit to growth. In general, although UBS has acknowledged that India is not immune to global trading tension, he believes that the country is relatively less vulnerable because of the limited dependence on goods trading and the growing share of exporting services, which now constitutes nearly 47 percent of total exports. Despite the downgraded GDP forecast, UBS reiterated that India’s structural growth narrative remains intact, with manageable macro risks and possible damping of domestic demand and policy support. Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, and not of currency. We advise investors to check with certified experts before making investment decisions. First Published: 16 Apr 2025, 11:21 am Ist
UBS cut India’s FY26 GDP forecast to 6% amid US tariff increase and global growth problems | Mint
