Fitch Ratings reaffirms sovereign debt rating of India with a stable outlook

Another major development comes as Fitch Ratings has reaffirmed the rating of India's sovereign debt at BBB- while maintaining a stable outlook and pointed to strong growth potential and fiscal credibility for the country in its report dated August 29. The rating firm said that India has been able to resist the unfavourable situation of the global economic atmosphere and hinted that the country keeps its bases covered for financial stability.

What does a rating of BBB- mean?

Rating of BBB-, the lowest investment grade category, based on a current expectation that default risk is low. It also reflects an adequate capacity to meet financial commitments, which may be vulnerable to adverse economic conditions and changes in circumstances compared with higherrated borrowers.

In this regard, Fitch's move to maintain India's rating at BBB with a stable outlook reflects its belief in the trajectory of the country's economy. The stable outlook implies that ratings are unlikely to change unless there is a remarkable change in the country's economic performance and fiscal policies.

Reasons for India's good growth outlook

India's good growth outlook according to Fitch is supported by the following factors:

• Resilience amidst Global Economic Challenges: Despite the unending global economic uncertainties, India has been able to keep up its ground and be steady on its financial standing.

• Strong Growth Potential: Fitch expects India's GDP growth to rebound to 6.7% in fiscal year 2025 after recovery in the succeeding years.

• Given the good performance of the banking and private sectors, the government's initiatives into infrastructure-together with the growing bank and private sector balance sheets-will continue to ramp up investment growth.

• High general government debts: India's general government debt remains high relative to the median of countries rated BBB. There is nevertheless some offsetting to the high government debt burden from reliance on domestic, rather than foreign, sources of financing.

While mentioning strengths, Fitch pointed out areas that require attention:

• Current Account Deficit: Fitch outlined that India must make efforts toward narrowing the current account deficit in order to retain its strong financial position.

• Financial Sector: Fitch advised that reforms in boosting efficiency and stability in the financial sector would add to growth.

• Inflation rate moderation: Controlling inflation is crucial to sustaining purchasing power and, therefore, to sustainable economic development.

• Integrate ESG governance: Fitch also recommended incorporating ESG considerations into policy decisions in India for long-term growth and stability.

Thus, with Fitch confirming India's BBB rating on a stable outlook, the economy unleashes its strength and potential for growth. While India tries to tackle the global economic scenario, policymakers are expected to remove the challenges observed and continue with the policies supporting sustainable economic development.