Fitch Ratings has once again affirmed the credit rating of India at 'BBB-' with a stable outlook, attributing the country's robust economic growth and favorable external financial situation as the main underpinning factors.
"India's economic prospects are still robust compared with peers despite weakening momentum over the last two years," the agency said. "We project GDP growth at 6.5 per cent in the year to March 2026 (FY26), which is the same as FY25, and comfortably above the 'BBB' median of 2.5 per cent," Fitch said in a report issued on Monday.
Fitch believes that the near-term effect of the US tariff hike on India's GDP will be minimal as exports to the US account for merely about 2 per cent of GDP. Fitch also believes that the 50 per cent tariff levied by the Trump administration will come down subsequent to trade talks between the two countries.
The agency emphasized that India's economic growth, together with macroeconomic stability and enhanced fiscal credibility, would lead to gradual improvement in structural indicators like GDP per capita. This would, in turn, moderately lower India's debt levels in the medium term.
However, Fitch identified the US tariff increase as a "moderate" negative risk to its expectations, as it further pointed out that the uncertainty would reduce private investment.
US tariffs are a moderate downside risk to our projection, but have a high level of uncertainty. The US is to impose a 50 per cent headline tariff on India by 27th August, although we expect this to be negotiated down eventually," Fitch added.
The report further highlighted that local demand is expected to continue to be strong, driven by the continuation of public capital spending programs and the continuation of private consumption. Private investment, however, might stay subdued because of increased risk from American tariffs.
Fitch also noted that India's fiscal metrics are a "credit weakness," with elevated deficits, debt, and debt service burden relative to 'BBB' peers. Structural limitations like governance measures and GDP per capita also bear on the rating.
Read also| Top 8 of 10 Most Valuable Companies Boost Market Cap by ₹1.72 Lakh Crore
