Fitch Ratings on India's Economic Outlook

Fitch Ratings has retained India's rating at BBB- with a 'stable' outlook. The decision is based on India's strong growth prospects and solid external financial position.

Key Factors Influencing Rating

• Growth and Financial Stability: India's rating is supported by robust growth and strong external finances.
• Fiscal Metrics: Despite positive aspects, high deficits and debt at the general government level, along with lagging structural metrics like governance indicators and GDP per capita, constrain the rating.

Impact of U.S. Tariffs

• U.S. tariffs pose a moderate downside risk to India's economic forecast.
• Business Sentiment: The tariffs may dampen business sentiment and investment due to uncertainty.
• Competitiveness: India's competitiveness might be adversely affected compared to other Asian countries.
• GDP Impact: Direct impact on GDP is expected to be modest as exports to the U.S. constitute only 2% of India's GDP.

Future Outlook

• Improvement Paths: Strengthening growth with macroeconomic stability and fiscal credibility can improve structural metrics like GDP per capita.
• Debt Trend: There's a potential for a modest downward trend in debt if improvements continue.