All three major global ratings agencies, Moody’s, S&P and now Fitch, have stable outlook for India’s sovereign ratings, which provides comfort to policymakers battling to secure growth against the backdrop of geopolitical tensions. The rating also balances India's external resilience from solid foreign exchange reserve buffers against some lagging structural indicators.
Fitch Ratings has now revised the outlook on India’s sovereign rating to stable from negative, saying downside risks to medium-term growth have diminished due to the rapid economic recovery and easing financial sector weaknesses, despite near-term headwinds from the global commodity price shock.
Fitch retained the rating at BBB (minus) and said that it expects robust growth relative to peers to support credit metrics in line with the current rating.
It said India's economy continues to see a robust recovery from the Covid-19 pandemic shock. India’s GDP recovered by 8.7% in the fiscal year ended March 2022 (FY22), and forecast GDP growth to remain robust at 7.8% in FY23, lower than the 8.5% forecast in March as the inflationary impacts of the global commodity price shock are dampening some of the positive growth momentum.
It said conditions in the financial sector were a key growth impediment before the pandemic, but have improved in recent years.
