Fitch affirms India's 'BBB-' rating, says economic outlook remains strong
What's the story
Global credit rating agency Fitch has affirmed India's long-term credit rating at 'BBB-' with a "stable" outlook. The agency said the country's ratings are supported by its robust growth and solid external finances. Despite a slight moderation in momentum over the last two years, India's economic outlook remains strong compared to its peers.
Growth projection
Fitch projects India GDP growth at 6.5% in FY26
Fitch has projected India's GDP growth at 6.5% for the fiscal year ending March 2026 (FY26). This is in line with FY25 and well above the 'BBB' median of 2.5%. The agency expects domestic demand to remain strong, driven by public capex and steady private consumption. However, it also anticipates private investment to stay moderate amid heightened US tariff risks.
Tariff implications
US tariff impact on India GDP to be modest
Fitch has said that the direct impact of the upcoming US tariffs on India's GDP will be modest. This is because exports to America account for only 2% of India's GDP. However, the agency warned that tariff uncertainty could hurt business sentiment and investment. The Trump administration plans to impose a 50% tariff on Indian goods starting August 27.
Inflation outlook
Low inflation may prompt RBI to cut rates again: Fitch
Fitch has said that low inflation will allow for another 25 basis point cut in 2025. This comes as falling food prices and Reserve Bank of India (RBI) policy measures have kept inflation under control. Core inflation remains stable around the RBI's target band, with headline inflation dropping to 1.6% in July due to easing food prices.
Fiscal forecast
Fitch expects credit growth to pick up
Fitch has projected a pick-up in credit growth due to monetary easing, despite a slowdown to 9% in May from 19.8% last year. The agency also expects the central government's fiscal deficit to narrow to 4.4% of GDP in FY26, meeting its budget target of 4.5%. This is an improvement from the estimated general government (GG) deficit of 7.8% in FY25, which Fitch expects will decline gradually over the next few years.