Fitch retains India's sovereign rating, says risks to medium-term growth 'narrowing'

New Delhi: Fitch Ratings on Tuesday kept India’s sovereign rating unchanged at ‘BBB-’ with a negative outlook, and said that the rating balances a still-strong medium-term growth outlook and external resilience from solid foreign-reserve buffers against high public debt, a weak financial sector and some lagging structural issues. It said the country’s rapid economic recovery from the COVID-19 pandemic and easing financial sector pressures are narrowing risks to the medium-term growth outlook. However, the negative outlook on the rating reflects lingering uncertainty around the medium-term debt trajectory, particularly given India’s limited fiscal headroom relative to rating peers. “We forecast robust GDP growth of 8.7 percent in the fiscal year ending March 2022 (FY22) and 10 percent in FY23 (ending March 2023), supported by the resilience of India’s economy, which has facilitated a swift cyclical recovery from the Delta Covid-19 variant wave in 2Q21,” Fitch said while affirming India at ‘BBB-’; with a negative outlook. Mobility indicators have returned to pre-pandemic levels and high-frequency indicators point to strength in the manufacturing sector. “The potential remains for a resurgence in coronavirus cases, though we anticipate the economic impact of further outbreaks would be less pronounced than previous surges, particularly given the sustained improvement in the COVID-19 vaccination rate, which has now surpassed 1 billion doses administered,” it said. Last month another global rating agency Moody’s Investors Service had affirmed India’s sovereign rating and upgraded the country’s outlook to ‘stable’, from ’negative’ citing receding downside risks to economy and financial system.