Fitch Ratings Upholds India's 'BBB-' with Stable Outlook Amid Strong Medium-Term Growth

Fitch Ratings has affirmed India's Long-Term Foreign-Currency Issuer Default Rating at 'BBB-' with a Stable Outlook, citing robust medium-term growth. The rating underscores the country's fiscal improvements and strong investment trends, though challenges remain with fiscal deficits and debt burdens.

New Delhi [India], August 30 (ANI): Fitch Ratings on August 29 reaffirmed India's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a Stable Outlook. This decision comes on the back of India's robust medium-term growth, which the agency believes will continue to enhance the nation's structural credit profile, including its global GDP share.

The rating agency highlighted that such growth would bolster India's external financial stance. The government's initiatives to improve fiscal credibility—such as setting deficit targets, increasing transparency, and ensuring buoyant revenue—are expected to reduce national debt in the medium term.

However, the agency warned that fiscal metrics still pose a challenge, with deficits, debt, and debt service burdens remaining high relative to other 'BBB' range peers. India's GDP growth metrics are impressive, placing the country among the fastest-growing economies worldwide. Fitch forecasts GDP growth will stay at 7.2% for the fiscal year ending March 2025 (FY25) and 6.5% in FY26, compared to 8.2% in FY24. Improved capital expenditure on public infrastructure is credited with enhancing spending quality amid fiscal consolidation efforts.

Private real estate investment is expected to remain strong, and an uptick in manufacturing investment has been noted. Fitch estimates India's potential GDP growth at 6.2%, driven by robust infrastructure development, a strong services sector, and solid private investment outlook. Positive developments in the health of bank and corporate balance sheets are anticipated to further support investment cycles.

The central government's fiscal consolidation is progressing faster than anticipated, with high capital expenditure underscoring its commitment to reducing deficits. Fitch predicts the FY25 deficit will be 4.9% of GDP, aligned with the July budget, improving from a better-than-expected 5.6% in FY24. This optimistic outlook reflects robust revenues, including a greater-than-budgeted Reserve Bank of India (RBI) dividend, and restrained social spending, especially during an election year.

(With inputs from agencies.)