Fitch Ratings has affirmed India’s sovereign rating at ‘BBB-‘ with a stable outlook, indicating that the country has a strong growth outlook and resilient external finances. Fitch Ratings believes that India’s rating reflects strengths from a robust growth outlook compared with peers and resilient external finances, which have supported India in navigating large external shocks over the past year. However, these are offset by India’s weak public finances, illustrated by high deficits and debt relative to peers, as well as lagging structural indicators, including World Bank governance indicators and GDP per capita. The global rating agency has kept India’s credit rating unchanged at ‘BBB-‘ since August 2006.
Fitch Ratings forecast India to be one of the fastest-growing rated sovereigns globally at 6% in the current fiscal year ending March 2024 supported by resilient investment prospects. However, headwinds from elevated inflation, high-interest rates, and subdued global demand, along with fading pandemic-induced pent-up demand, will slow growth from the forecasted 7% for FY23 before rebounding to 6.7% by FY25.
India’s economy has been hit hard by the Covid-19 pandemic, and the country experienced a severe second wave earlier this year. However, Fitch Ratings expects the Indian economy to recover gradually, as vaccination rates improve and the government implements measures to boost economic activity.
The affirmation of India’s sovereign rating by Fitch Ratings comes at a time when the country’s benchmark indices have been on an upward trend, supported by foreign institutional investors’ continuous buying and signs that recession fears in the US are easing. The BSE Sensex climbed 173.65 points to 61,937.90 in early trade on Tuesday, while the NSE Nifty advanced 54.35 points to 18,318.75.
