Fitch affirms India's 'BBB-' sovereign rating with stable outlook

Fitch Ratings has affirmed India’s sovereign credit rating at ‘BBB-’ with a stable outlook. The agency forecasts resilient economic growth, estimating a GDP increase of 6.4% for the fiscal year ending March 2027 (FY27).

Key drivers for this expansion include public capital expenditure, a recovery in private investment, and favorable demographics. While the agency noted potential headwinds from energy shocks related to conflicts in West Asia, it expects India’s economy to remain resilient to external shocks.

Regarding monetary policy, Fitch anticipates the Reserve Bank of India may raise its policy rate by 25 basis points to 5.5% later this year to manage risks from energy prices and El Nino conditions. Inflation is projected to average 4.1% in FY27.

On the fiscal front, the general government deficit is expected to narrow to 7.3% of GDP in FY27. The government aims to reduce its debt-to-GDP ratio to 50% by March 2031, with the FY27 budget estimating the ratio at 55.6%.