Growth robust, external finances solid: Fitch says India outlook stable, affirms sovereign ratings at BBB-

Fitch Ratings on Monday affirmed India’s sovereign rating as ‘BBB-’ with a ‘stable’ outlook.

The BBB- rating and stable outlook a result of “robust growth and solid external finances”, Fitch said in a statement.

Fitch sovereign ratings help investors judge the risk of putting money in a country. Its ratings —ranging from the highest ‘AAA’ to the lowest ‘D’ (default)— assess a country’s ability to meets its financial commitments. The factors that go into the determination of a country’s ratings are economic fundamentals, fiscal policy, political stability, and the country’s standing in the world. Countries with higher ratings have greater investors’ confidence and cheaper cost of borrowing.

The BBB- rating that India has falls into ‘investment grade’. It means that the country is expected to meet financial commitments and obligations and has an acceptable risk for mainstream institutional investments. Ratings below BBB- are dubbed speculative or junk and make borrowings expensive.

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In its statement about India, Fitch said, “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.”

Fitch further said that India’s economic outlook remains “strong” compared to its peers.

India to grow at 6.5%, Trump’s tariffs to have modest effect: Fitch

In the current financial year, Fitch has projected India’s GDP to grow at 6.5 per cent, as per Fitch.

Domestic demand will remain solid, underpinned by the ongoing public capital expenditure drive and steady private consumption, according to Fitch.

As for 50 per cent tariffs imposed by US President Donald Trump, Fitch said that the final tariffs are likely going to be set lower as a result of negotiations.

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he Trump administration is planning to impose a 50% headline tariff on India by 27 August, although we believe this will eventually be negotiated lower.

Fitch said that tariffs’ direct impact on GDP will be modest as exports to the United States account for 2 per cent of GDP, but tariff uncertainty will dampen business sentiment and investment.

Moreover, India’s ability to benefit from supply chain shifts out of China would be reduced if American tariffs remain at 50 per cent — above that of India’s Asian peers, as per Fitch.