Fitch Ratings on India
Fitch Ratings has maintained India's sovereign credit rating at 'BBB-', the lowest investment grade, with a stable outlook. This decision follows S&P's upgrade of India's rating, the first in 18 years. Fitch has had the same rating for India since 2006.
Key Observations and Ratings
- Risk from US Tariffs: Fitch perceives a "modest" risk to the Indian economy from additional US tariffs due to the limited export exposure to the US.
- Moody's Rating: Moody’s retains its rating at ‘Baa3’, equivalent to Fitch's, since 2020.
- S&P's Upgrade: S&P recently upgraded India's rating to ‘BBB’, highlighting India's resilience and fiscal consolidation.
Economic Outlook and Challenges
- Growth Outlook: Fitch acknowledges India's robust growth outlook with expected growth rates reaching 6.5% in FY26.
- Fiscal Concerns: Weakness in fiscal metrics such as high deficits and debt services remain a concern.
- Impact of Tariffs: While direct impacts are modest, tariff uncertainty could affect business sentiment and investment.
Potential Growth Drivers
- Goods and Services Tax Reforms: Proposed reforms could boost consumption and counteract some growth risks.
- Public and Private Investments: Strong public capital expenditure and private investment pickup are expected to drive growth.
- Favorable Demographics: Supports a medium-term potential growth rate of 6.4%.
Fiscal Policy and Debt
- Fiscal Deficit: Predicted to reach 4.4% of GDP by FY26, with a slight drop to 4.1% by FY28.
- Government Debt: Expected to decrease slowly to 78.5% of GDP by FY30 from 80.9% in FY25.
- Fiscal Consolidation: Stalling efforts or economic shocks could negatively impact ratings.
Overall, while India's economic growth prospects are strong, challenges such as fiscal deficits and external uncertainties pose risks. Improved fiscal transparency and commitment to fiscal consolidation are seen positively.
