Fitch emphasised that India’s economy has been resilient to shocks in recent years, a trend it expects to continue
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Fitch Ratings on Tuesday affirmed India’s sovereign rating at ‘BBB Minus.’ The outlook is stable implying that downgrade is unlikely in the near term. However, the agency flagged risks of pressure on fiscal spending amid protests by youthThis is the 20th year in row for retaining the rating. This rating is last investment grade.“India’s rating reflects its robust growth outlook and solid external finance fundamentals,” the agency said. Further, a strengthening record of delivering macroeconomic stability and improving policy credibility should underpin continued robust growth and enhance economic resilience, despite near-term macroeconomic headwinds from the energy shock.High growth should also support a sustained improvement in structural credit metrics and increase the likelihood that government debt will trend down. These strengths are balanced against still-weak fiscal metrics, with high deficits, debt and debt service compared with peers, despite recent consolidation.Lagging Metrics“Lagging structural metrics, including governance indicators and GDP per capita, also constrain India’s rating,” the agency explained.According to the agency, the Bharatiya Janata Party (BJP), which heads the national government coalition under Prime Minister Narendra Modi, has seen further gains in state-level elections, which may support the implementation of policy priorities. There are now BJP-controlled governments in 17 states with coalition partners controlling four others. “Recent protests, stemming from leaked medical exams, may point to rising concerns among youth over employment opportunities, risking fiscal spending pressures over time,” it said.The ratings agency forecast a 6.4 per cent GDP growth in the current fiscal year. The growth is, however, slower than the average 7.4 per cent growth clocked over the past three years. It emphasised that India’s economy has been resilient to shocks in recent years, a trend it expects to continue.Growth Prospects“There are residual risks from uncertainty related to the US-Iran conflict, given India’s position as large net energy importer position, but we do not expect a durable risk to growth prospects,” Fitch said. India imports 87 per cent of its crude requirement, of which 46 per cent transits through or near the Strait of Hormuz, which is blocked on account of the US-Iran war which began on February 28.Fitch said India’s rating reflects its robust growth outlook and solid external finance fundamentals. A strengthening record of delivering macroeconomic stability and improving policy credibility should underpin continued robust growth and enhance economic resilience, despite near-term macroeconomic headwinds from the energy shock. High growth should also support a sustained improvement in structural credit metrics and increase the likelihood that government debt will trend down, Fitch said.Widening CADIn the FY27 Budget, the government estimated the debt-to-GDP ratio at 55.6 per cent of GDP, lower than 56.1 per cent of GDP in FY26. The government has set a target to bring down its debt-to-GDP ratio to 50 per cent by March 2031.Fitch estimates India’s medium potential GDP growth of 6.4 per cent, led by public capex, a private investment pick-up and favourable demographics. It said India’s external finances remain solid, with a low current account deficit (CAD), net external creditor position and still high forex reserves. Fitch forecast a slight widening of CAD to 1.4 per cent of GDP in FY27 from 0.6 per cent in FY26, from the energy shock.Published on August 11, 2026
