On Tuesday, Fitch Ratings affirmed India's sovereign rating at 'BBB-' with a stable outlook, underscoring the nation's robust medium-term growth prospects and solid external finances. This rating, at the lowest investment grade, has remained unchanged since August 2006.
In a statement, Fitch Ratings highlighted India's position as one of the fastest-growing countries globally in the coming years, citing the resilience of its robust economic momentum. The agency projected a GDP growth of 6.9 percent for the fiscal year ending March 2024 (FY24), with a slight easing to 6.5 percent in FY25.
Fitch anticipates that investment will continue to be a key growth driver, supported by ongoing government capex initiatives and a gradual acceleration in private investment. However, it foresees a moderation in consumption in the near term due to diminished household savings buffers.
The sovereign rating for India is bolstered by a positive medium-term GDP growth outlook and resilient external finances. Fitch commended India for effectively navigating a challenging external environment in recent years. Despite these strengths, Fitch acknowledged weak public finances as the primary constraint, characterized by high deficits, debt levels, and interest-to-revenue ratios compared to peer nations.
The rating agency also noted that lagging structural metrics, including World Bank governance indicators and GDP per capita, contribute to the overall assessment. While India exhibits notable strengths, addressing fiscal challenges and improving structural metrics will be critical for further enhancing its sovereign rating in the future.
(With Agency Inputs)
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