Fitch Ratings Affirms India's 'BBB-' Credit Rating With Stable Outlook

Fitch Ratings has affirmed India's Long-Term Foreign-Currency Issuer Default Rating at 'BBB-' with a Stable Outlook. The rating highlights India's strong medium-term growth, which is set to boost its global GDP share. Fiscal credibility measures and robust economic growth are also noted positives.

On August 29, Fitch Ratings, a leading American credit rating agency, affirmed India's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a Stable Outlook. The agency attributed this outlook to India's strong medium-term growth, which is expected to enhance the nation's structural credit profile and increase its share of global GDP.

Fitch noted that India's robust medium-term growth would fortify the country's external finance position. The report praised governmental actions aimed at bolstering fiscal credibility through deficit targets, improved transparency, and buoyant revenues, all of which are anticipated to reduce government debt over the medium term.

Nevertheless, Fitch identified fiscal metrics as a persistent credit weakness, citing high deficits, significant debt, and substantial debt service burdens relative to 'BBB' range peers. Despite these challenges, India is expected to remain one of the fastest-growing sovereigns globally, with GDP growth projected at 7.2% for FY25 and 6.5% for FY26, down from 8.2% in FY24, according to the agency's forecast.

The report also highlighted improvements in public infrastructure spending, private investment in real estate, and emerging trends in manufacturing investment. Fitch estimated India's potential GDP growth at 6.2%, driven by infrastructure expansion, a strong services sector, and a robust private investment outlook. It indicated that healthier bank and corporate balance sheets would support a positive investment cycle.

In its outlook, Fitch also noted that the central government's fiscal consolidation efforts are advancing faster than expected, driven by high capital expenditure aimed at reducing deficits. The FY25 deficit is forecast to reach 4.9% of GDP, compared to a better-than-expected 5.6% in FY24, reflecting buoyant revenues and a larger-than-budgeted RBI dividend.

(With inputs from agencies.)