Fitch Reaffirms India Rating With Negative Outlook
Fitch Ratings Inc. has reaffirmed India’s sovereign rating but maintained a negative outlook on it.
India's long-term foreign-currency issuer default rating at 'BBB-' with a negative outlook, Fitch said in a release on Tuesday.
The rapid economic recovery from the Covid-19 pandemic and easing financial sector pressures are narrowing risks to the medium-term growth outlook, said Fitch. "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," the rating agency said.
Fitch sees India's GDP growth at 8.7% in FY22 and 10% in FY23.
We forecast growth of around 7% between FY24 and FY26, supported by the government's reform agenda and the closing of the negative output resulting from the pandemic shock.Fitch Ratings
According to the rating agency, the government's production-linked incentive scheme to boost foreign direct investment, labour reform and the creation of a 'bad bank', along with an infrastructure investment drive and the National Monetisation Pipeline, should support the growth outlook, if fully implemented.
Fitch forecasts the general government debt at 89.6% of the GDP in FY21, which is the highest among 'BBB' emerging-market sovereigns. This, according to the agency, constrains the government's ability to respond to shocks and could lead to crowding out of financing for the private sector.
“We forecast the ratio to decline slightly to 89.0%, still well above the 60.3% 'BBB' median in 2021. The debt ratio should fall to 86.9% by FY26 under our medium-term baseline forecasts, assuming 10.5% nominal growth and the gradual consolidation of the general government primary deficit to 2.5% of GDP in FY26," the rating agency said.