Fitch Ratings on Monday affirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-’ with a stable outlook.
India’s rating is supported by robust growth and strong external finances, the rating agency said in a statement.
It added that a strengthening record of delivering growth with macroeconomic stability and improving fiscal credibility should drive steady gains in structural metrics, including GDP per capita, and raise the likelihood of a modest decline in debt over the medium term.
Fitch said India’s economic outlook remains strong relative to peers, though growth momentum has moderated in the past two years. It projected GDP growth at 6.5 per cent for 2025-26, unchanged from 2024-25, and well above the ‘BBB’ median of 2.5 per cent.
“Domestic demand will remain solid, supported by ongoing public capex and steady private consumption. However, private investment is likely to remain moderate, particularly in view of heightened US tariff risks,” the agency noted.
Nominal GDP growth is expected to slow, with Fitch forecasting an expansion of 9.0 per cent in 2025-26, compared with 9.8 per cent in 2024-25 and 12.0 per cent in 2023-24. Nominal GDP includes headline inflation.
On the US tariff issue, Fitch flagged a moderate downside risk but said outcomes remain highly uncertain. The Trump administration has proposed a 50 per cent tariff on India from August 27, though Fitch expects this will eventually be negotiated lower.
“The direct impact on GDP will be modest as exports to the US account for just 2 per cent of GDP, but tariff uncertainty will weigh on business sentiment and investment. India’s ability to benefit from supply chain shifts out of China would also be reduced if US tariffs remain higher than those on Asian peers,” it said.
Fitch also pointed out that proposed goods and services tax (GST) reforms, if implemented, could support consumption and offset some growth risks.
Falling food prices and policy action by the Reserve Bank of India (RBI) have helped keep inflation contained. Core inflation is stable at around 4 per cent, near the midpoint of the RBI’s 2–6 per cent target band. Headline inflation eased to 1.6 per cent in July, largely due to lower food prices.
The RBI has reduced the policy repo rate by 100 basis points to 5.5 per cent between February and June 2025. Fitch expects space for one more 25-basis-point cut this year, citing low inflation.
Credit growth slowed to 9.0 per cent in May, compared with 19.8 per cent a year earlier, reflecting high policy rates and tighter rules on unsecured consumer credit. However, Fitch projected credit growth to recover as monetary easing takes hold.
-ANI