Fitch Ratings on Monday reaffirmed India’s credit rating at BBB- with a stable outlook, citing strong economic growth and resilient external finances. However, the agency flagged India’s high fiscal deficits, debt, and debt servicing costs as key weaknesses when compared with other countries in the BBB category. It also noted that structural factors such as governance indicators and low GDP per capita continue to weigh on the rating.
Despite a slowdown in momentum over the past two years, Fitch said India’s economic outlook remains strong relative to peers. It forecasted GDP growth of 6.5 percent for FY26 (ending March 2026), unchanged from FY25. Nominal GDP growth, however, is expected to ease to 9.0 percent in FY26, compared with 9.8 percent in FY25 and 12 percent in FY24.
According to Fitch, growth will be supported by robust domestic demand, driven by ongoing public capital expenditure and steady private consumption. But private investment may remain subdued due to heightened US tariff risks. The Trump administration has proposed a 50 percent tariff on Indian imports by August 27, though Fitch expects eventual negotiations could lower this rate. While exports to the US make up only 2 percent of India’s GDP, the uncertainty around tariffs could weaken business confidence and investment.
On inflation, Fitch highlighted that India enjoys a relatively benign environment, creating room for the Reserve Bank of India (RBI) to cut policy rates by another 25 basis points in 2025. Falling food prices and RBI measures have kept headline inflation at 1.6 percent in July, well below the 2–6 percent target range, with core inflation steady at around 4 percent. Between February and June 2025, the RBI has already reduced the repo rate by 100 basis points to 5.5 percent.
Looking ahead, Fitch estimates India’s potential GDP growth at 6.4 percent, supported by strong public capex, a likely pickup in private investment, and favorable demographics. It noted that healthy corporate and banking sector balance sheets should aid investment, provided domestic consumption remains stable. GST reforms are also expected to contribute positively to growth. However, Fitch cautioned that despite India’s new bilateral trade deals, trade barriers remain relatively high.