Fitch Ratings on Thursday cut India's GDP growth estimate by 10 basis points to 6.4 per cent for the current fiscal, but retained the projections for the next financial year, on concerns over a 'severe' escalation in global trade war.

"It is hard to predict US trade policy with any confidence. Massive policy uncertainty is hurting business investment prospects, equity price falls are reducing household wealth, and US exporters will be hit by retaliation," Fitch said in its special update to quarterly Global Economic Outlook (GEO).

Fitch also cut the world growth projections in 2025 by 0.4 percentage points and China and US growth by 0.5 percentage points from its March GEO.

"Fitch Ratings' forecasts for world growth have been sharply lowered in response to the recent severe escalation in the global trade war. World growth is projected to fall below 2 per cent this year; excluding the pandemic, this would be the weakest global growth rate since 2009," it said.

With regard to India, Fitch cut GDP growth estimates for both the 2024-25 fiscal and the current 2025-26 fiscal by 10 basis points to 6.2 per cent and 6.4 per cent, respectively. For the 2026-27 fiscal year, growth has been retained at 6.3 per cent.

The GDP growth rate of the United States is expected to remain positive at 1.2 per cent for 2025. China's growth is expected to fall below 4 per cent both this year and next, while growth in the eurozone will remain stuck well below 1 per cent, as per Fitch projections.

It said the US 'Liberation Day' tariff hikes were far worse than expected.

While subsequently paused and replaced with a near-universal 10 per cent rate for 90 days, the shock prompted several rounds of retaliatory moves between China and the US, taking bilateral tariff rates over 100 per cent.

The US average effective tariff rate (ETR) has risen to 23 per cent, the highest since 1909 and well above the 18 per cent Fitch assumed in March. Fitch now assumes the US ETR on China will remain above 100 per cent for some time before falling back to 60 per cent in 2026.

"For now, we stick with our March assumption of a 15 per cent US ETR on other trade partners," Fitch added.