Domestic brokerage Kotak Institutional Equities (Kotak Securities) has trimmed India’s FY26 GDP growth estimate to 6 per cent from 6.5 per cent earlier due to a global demand slowdown caused by the tariff war.
The Indian economy is expected to face the hear of global slowdown due to a trade war triggered by US President Donald Trump’s tariff strategy. India’s gross domestic product (GDP) may see some moderation due to a decline in exports and corporate profits.
“A global demand slowdown from the tariff war continuing over the next few months will weigh on the Indian economy. While domestic growth drivers could partly cushion external uncertainties, the need for policy support will increase,” said Kotak.
Meanwhile, on Wednesday, April 9, the Reserve Bank of India (RBI) also cut India’s GDP growth projections for FY26 to 6.5 per cent from 6.7 per cent earlier.
Growth to slow down
Kotak has revised the GDP growth range to 5.8-6.2 per cent, assuming global growth slows to sub-2 per cent in the calendar year 2025.
“The impact will likely be transmitted through (1) a sharp decline in merchandise exports (around 8 per cent decline), (2) corporates’ (including SMEs) profits (SMEs contribute to 45 per cent of exports), and (3) further headwinds to the investment cycle,” Kotak said.
Kotak pegs the FY26E CAD-to-GDP at 1 per cent against 0.9 per cent earlier, factoring in a “sharp decline in goods exports, a marginal decline in goods imports, and stagnant services’ surpluses and remittance flows with downside risks.”
“We remain conservative in our capital flow assumptions with a downside risk. This would imply a BOP (balance of payments) deficit of $3.3 billion (earlier: $10 billion surplus),” Kotak said.
Rupee could be in a range of 84.5-88 in FY26
Kotak has maintained a modest depreciation bias on the Indian rupee (INR) in FY26, with a range of 84.5-88 against the US dollar, averaging around 86.3.
Kotak believes the dollar may be on a relatively weak footing as the US exceptionalism theme fades. The brokerage firm also believes the real interest rate differential between the US and India will support the INR.
However, Kotak added that tariff-led uncertainties, CNY (Chinese Yuan) devaluation risks, and capital outflow risks will continue to weigh on the INR. The brokerage firm also expects the RBI to cap gains in the INR and limit the appreciation bias.
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