Fitch Ratings Affirms India’s ‘BBB-‘ Rating with Stable Outlook
On August 29, American credit rating agency Fitch Ratings affirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-‘ with a Stable Outlook. This decision is based on India’s strong medium-term growth, which is expected to improve its credit profile and share of GDP in the global economy.
Fitch Ratings noted that India’s strong growth will strengthen its external finance position. The government’s actions to enhance fiscal credibility through deficit targets, transparency, and buoyant revenue are expected to reduce government debt in the medium term. However, fiscal metrics such as deficits, debt, and debt service burden remain high compared to peers.
India is set to remain among the fastest-growing sovereigns globally, with GDP growth forecasted at 7.2% for the fiscal year ending March 2025 (FY25) and 6.5% in FY26, down from 8.2% in FY24. Capital expenditure on public infrastructure has improved spending quality, and private investment in real estate and manufacturing is picking up.
Fitch estimates India’s potential GDP growth at 6.2%, supported by infrastructure development, a strong services sector, and solid private investment. The improved health of bank and corporate balance sheets should lead to a positive investment cycle.
Fiscal consolidation by the central government is advancing faster than expected, with a forecasted FY25 deficit of 4.9% of GDP, down from 5.6% in FY24. This improvement is due to buoyant revenues, a larger-than-budgeted Reserve Bank of India (RBI) dividend, and contained social spending, even during an election year.
Doubts Revealed
Fitch Ratings -: Fitch Ratings is a company that gives grades to countries and companies based on how likely they are to pay back their loans. It’s like a report card for how good they are with money.
BBB- -: ‘BBB-‘ is a grade given by Fitch Ratings. It means that India is considered to have a good ability to pay back its loans, but there are some risks.
Stable Outlook -: A ‘Stable Outlook’ means that Fitch Ratings thinks India’s financial situation will stay the same for a while, without getting much better or worse.
Long-Term Foreign-Currency Issuer Default Rating -: This is a fancy way of saying how likely India is to pay back its long-term loans that are in foreign money, like US dollars.
GDP -: GDP stands for Gross Domestic Product. It’s the total value of all goods and services produced in a country. It’s like the country’s income.
Capital Expenditure -: Capital Expenditure is money spent by the government or companies to build things like roads, bridges, and factories. It’s like investing in big projects.
Fiscal Consolidation -: Fiscal Consolidation means the government is trying to reduce its debt and deficits by managing its spending and income better.
FY25 -: FY25 stands for Fiscal Year 2025. A fiscal year is a 12-month period used for budgeting and financial purposes. FY25 means the year ending in 2025.
