Fitch Ratings Affirms India's BBB- Rating On Growth Curve, Outlook Stable
Fitch rating has predicted that India's GDP will grow at 6.5% in the current fiscal year
Fitch Ratings has affirmed India's India's long-term foreign-currency issuer default rating 'BBB-' with a stable outlook. The rating agency mentioned that robust growth and solid external finances supported the rating stability. Fitch Ratings' rating affirmation came a few days after S&P Global upgraded India's to BBB from BBB-, with a stable outlook.
India's record in delivering growth along with macroeconomic stability and improving fiscal stability will enhance structural metrics, including GDP per capita, the rating agency said in an article on Monday. These factors can also help India to reduce its debt in the medium term.
The rating agency has forecasted 6.5% GPD growth for the current financial year, unchanged from the forecast for the previous financial year. The growth rate is well above the medium 2.5% for countries with 'BBB' ratings.
Private investment in India are likely to remain moderate in India especially given the higher US tariff, Fitch Rating said. There has been a notable decline in nominal GDP growth. The nominal GDP may increase to 9.0% in the financial year 2026 compared to 9.8% in the previous financial year.
The central government deficit fell to 4.8% of GDP in the financial year 2024 from a peak of 9.1% in financial year 2019. " Strong revenue growth and reductions in subsidy spending drove consolidation even as capex spending rose steadily to 3.2% of GDP in FY24 from around 1.5% in FY19."
Fitch Rating is seeing India's fiscal deficit decline to 4.4% of GDP in financial year 2026. This means that Indian government will meet its target of reaching fiscal deficit of 4.5% by financial year 2026. After the current financial year, the fiscal deficit may decline to 4.3% of GDP in financial year 2027 and 4.1% in the following financial year.
Meanwhile, fiscal metrics with high deficit, debt, and debt services are credit weaknesses compared to other 'BBB' peers. Lagging structural metrics along with governance indicators and GDP per capital will also constrain the rating, Fitch said.
India's general government debt burden is high. Fitch Ratings estimates it at 80.9% of GDP of financial year 2025, which is quite higher above 59.6% median noticed in other countries in the same rating. There will be a slight rise to debt to 81.5% in financial year 2026 as nominal growth slips.
