Fitch Ratings confirms India's sovereign rating at 'BBB-' with a Stable Outlook
On August 29, Fitch Ratings reaffirmed India's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a Stable Outlook.
This affirmation reflects India's robust medium-term growth, which Fitch expects to enhance the country's credit profile, including its share of global GDP. The rating agency anticipates that continued growth will bolster India's external financial position.
Fitch noted that the Indian government's efforts to improve fiscal credibility—through deficit targets, increased transparency, and strong revenue—are expected to reduce government debt in the medium term. However, fiscal metrics remain a weakness, with high deficits, debt, and debt service burdens compared to peers in the 'BBB' category. Structural issues, such as governance and GDP per capita, also impact the rating.
Despite these challenges, India is projected to continue as one of the fastest-growing economies globally. Fitch forecasts GDP growth at 7.2% for the fiscal year ending March 2025 and 6.5% for FY26, slightly down from 8.2% in FY24.
The report highlights that increased capital expenditure on public infrastructure has improved the quality of spending, mitigating some effects of fiscal consolidation. Private investment in real estate remains strong, with signs of a gradual rise in manufacturing investment.
Fitch estimates India's potential GDP growth at 6.2%, supported by infrastructure development, a strong services sector, and a positive outlook for private investment. The agency also notes that recent improvements in bank and corporate balance sheets should foster a favorable investment cycle.
Furthermore, the central government's fiscal consolidation is progressing faster than anticipated, with the FY25 deficit projected at 4.9% of GDP, better than the 5.6% deficit recorded in FY24. This improvement is attributed to robust revenues, including a higher-than-expected dividend from the Reserve Bank of India (RBI), and controlled social spending.