Fitch gives India 'BBB-' rating, warns New Delhi on Donald Trump's tariff

Fitch Ratings, one of the world's foremost ratings agencies, on Monday affirmed India's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a stable outlook. The agency said in a statement that the ratings were based on India's
robust economic growth and solid external finances.

Fitch Ratings said India demonstrated a strengthening record of delivering growth with macro stability and improving fiscal credibility. It said these factors should improve structural metrics, including GDP per capita.

It further said that India's economic performance ensures the likelihood of a modest downward trend in the medium term. It said India's economic outlook will remain strong compared to its peers. The ratings agency said the GDP growth will be at 6.5 per cent in 2025-2026, which will be above the median of 'BBB' ratings at 2.5 per cent.

It asserted that India's domestic demand will remain solid. The ongoing capex drive and private consumption will remain robust. Due to the US tariff risk, it said, private investment will remain modest.

Fitch Ratings further said that India's nominal GDP has slowed down. It said the GDP growth will expand 9 per cent in 2025-2026, lower than 9.8 per cent in 2024 and 2025.

Fitch said that the direct impact of US tariffs on Indian GDP would be modest.

However, the uncertainty will dampen business sentiment, it added.

“The direct impact on GDP will be modest as exports to the US account for 2 per cent of GDP, but tariff uncertainty will dampen business sentiment and investment,” it said.

Moreover, India's ability to benefit from supply chain shifts out of China would be reduced if US tariffs ultimately remain above that of Asian peers, it added.

Fitch ratings also commented on India's proposed Goods and Services Tax reforms, saying that if adopted, they would support consumption.