Fitch Affirms India's Sovereign Rating At 'BBB-', Outlook Remains 'Stable'

After S&P Global raised India's long-term soverign credit rating to 'BBB' from 'BBB-', Fitch retained 'BBB-' rating for the south Asian nation, citing solid growth and external finances.

"A strengthening record on delivering growth with macro stability and improving fiscal credibility should drive a steady improvement in its structural metrics, including GDP per capita, and increase the likelihood that debt can trend modestly downward in the medium term," as per the official release.

While affirming a 'BBB-' rating, a stance that's remained unaltered since 2006, global credit rating agency maintained a stable outlook for India. 

Meanwhile, it mentioned that the Trump imposed tariffs are a moderate downside risk to their forecast, and are subject to a high degree of uncertainty, Fitch said.

On the other hand, the looming threat of second tranche of 50 per cent US tariffs is expected to be imposed India by 27 August.

“Proposed goods and services tax (GST) reforms, if adopted, would support consumption, offsetting some of these growth risks,” Fitch said. 

The Central administration has proposed to the Group of Ministers on GST rate rationalisation a 2-tier rate structure of 5 and 18 per cent for 'merit' and 'standard' goods and services, and a 40 per cent rate for about 5-7 goods. The proposal entails doing away with the current 12 and 28% tax slabs.

“A strengthening record on delivering growth with macro stability and improving fiscal credibility should drive a steady improvement in its structural metrics, including GDP per capita, and increase the likelihood that debt can trend modestly downward in the medium term,” it added. 

Further, it said, “Fitch, however, flagged fiscal metrics as a credit weakness, given the high deficits and debt compared to 'BBB' peers. “Lagging structural metrics, including governance indicators and GDP per capita, also constrain the rating.”