New Delhi, August 11: Global rating agency Fitch has retained India’s long-term issuer default rating at ‘BBB-‘ with a stable outlook, while maintaining the short-term issuer default rating at ‘F3’. This reflects India’s robust growth prospects and solid external financial fundamentals.
In a recent note, Fitch emphasized that maintaining macroeconomic stability and a strong track record of policy credibility will continue to underpin strong growth. Despite short-term economic challenges arising from the energy crisis, the economy’s resilience is expected to improve.
Fitch noted that, despite the energy crisis, India’s economy remains strong. The agency projects GDP growth of 6.4% for the fiscal year ending March 2027. While this is lower than the average of 7.4% over the past three years, it is still more than three times the average of 2.0% for countries rated ‘BBB’.
Fitch further stated that India’s economy has shown resilience to various shocks in recent years, and “we expect this trend to continue.” However, uncertainties related to the U.S.-Iran conflict pose some risks, as India is a major net energy importer. Nonetheless, long-term risks to growth prospects are not anticipated.
Inflation is rising due to the energy crisis, but Fitch expects it to remain within the Reserve Bank of India’s target range of 2-6%. The average inflation rate for fiscal year 2027 is projected at 4.1%, compared to 2.1% in fiscal year 2026. Signs indicate that inflation is stabilizing, with core inflation remaining around 4%.
Fiscal policy has limited the impact of the energy crisis on inflation, easing pressure on the Reserve Bank of India. Fitch anticipates that to address the effects of a second round of the energy crisis and risks from El Niño, the Reserve Bank may raise its policy rate by 25 basis points to 5.5% by the end of this year.
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