On Tuesday, Fitch Ratings affirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-‘ with a Stable Outlook. The global rating agency highlighted India’s strong growth potential and resilient external finances as key supporting factors for the sovereign rating. Fitch Ratings projected India to be one of the fastest-growing rated sovereigns globally, with a growth rate of 6% in the current fiscal year ending March 2024, supported by resilient investment prospects.
However, Fitch Ratings pointed out that India’s weak public finances, demonstrated by high deficits and debt relative to peers, as well as lagging structural indicators, including World Bank governance indicators and GDP per capita, offset these strengths. India’s credit rating has been unchanged at ‘BBB-‘ – the lowest investment-grade rating – since August 2006.
Fitch Ratings also noted that India’s growth could be slowed by headwinds from elevated inflation, high interest rates, subdued global demand, and fading pandemic-induced pent-up demand. Nonetheless, it is expected to rebound to 6.7% by the fiscal year 2024-25.
Overall, Fitch Ratings affirmed India’s sovereign rating and stable outlook due to the country’s robust growth outlook and resilient external finances, despite the challenges posed by weak public finances and lagging structural indicators.
