Global rating agency Fitch affirmed India’s ‘BBB-‘ rating on August 29 on the back of a stable growth outlook and fiscal credibility citing the country’s robust medium-term growth prospects and solid external finance position.
The ‘BBB’ rating reflects low default risk expectations, where the capacity to meet financial commitments remains adequate despite potential vulnerabilities from adverse business or economic conditions, according to Fitch Ratings.
Fitch said India is set to remain among the fastest-growing sovereigns globally with GDP growth of 7.2 percent in the current fiscal year and 6.5 per cent in FY26, down from 8.2 percent in FY24.
“Fitch Ratings has affirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-‘ with a Stable Outlook,” the global rating agency said in a statement. Fitch has kept India’s sovereign rating unchanged at ‘BBB-‘, the lowest investment grade, since August 2006.
Earlier in May, US-based S&P Global Ratings upped India’s rating outlook to positive from stable, while affirming the ‘BBB-‘ rating on improved quality of government expenditure and robust GDP growth.
“India’s ratings are underpinned by its strong medium-term growth outlook, which will continue to drive improvement in structural aspects of its credit profile, including India’s share of GDP in the global economy, as well as its solid external finance position,” the rating agency said.
However, Fitch cautioned that the private investment cycle might falter if subdued consumption hampers job creation. Elevated public debt remains a significant concern, with the debt trajectory highly sensitive to growth outcomes. Fitch warned that risks to the path of debt reduction persist if nominal growth falls below double digits.
Fitch said public infrastructure capex remains a key growth driver and has improved spending quality, helping mitigate the drag from fiscal consolidation. Private investment in real estate is likely to remain strong and there are signs of a nascent pick-up in manufacturing investment, it said.
The rating agency estimates India’s potential GDP growth at 6.2 percent, underpinned by the infrastructure push, strong services sector, and solid private investment outlook. The improved health of bank and corporate balance sheets in recent years should pave the way for a positive investment cycle, it said.
Fitch believes the central government fiscal deficit in FY26 will be 4.4 percent of GDP, lower than the target of 4.5 percent. On a general government basis, the deficit is forecast to fall to 7.3 percent of GDP in FY26 and 6.6 percent by FY29.
“Policy continuity around the infrastructure drive, digitalisation and ease of doing business measures supports growth, but coalition politics and a weakened mandate will likely constrain the government’s ability to enact major economic reforms, limiting upside to potential growth. Still, state governments are likely to steadily advance reforms around land and labour,” Fitch said in its report.