Fitch Ratings has reaffirmed India’s Long-Term Foreign-Currency Issuer Default Rating at ‘BBB-’ with a Stable Outlook, reflecting resilience in the country’s macroeconomic fundamentals despite external challenges. The affirmation highlights strong domestic demand, stable external finances, and a credible fiscal consolidation path.

Key Highlights

1. Economic Growth:

• Fitch projects GDP growth at 6.5% for FY26, unchanged from FY25 and well above the ‘BBB’ median of 2.5%.
• Strong domestic demand driven by public capital expenditure and private consumption.
• Private investments may remain moderate amid tariff uncertainties.

2. Tariff Impact:

• Upcoming U.S. tariffs pose a modest downside risk, but India’s exposure is limited as exports to the U.S. account for only 2% of GDP.

3. Inflation and Policy Space:

• Headline inflation fell to 1.6% in July, aided by lower food prices.
• Low inflation could allow monetary easing, giving the Reserve Bank of India room for rate cuts if needed.

4. Fiscal Position:

• Central government deficit is expected to narrow from 4.8% in FY25 to 4.4% in FY26, supported by:
  • Strong revenue growth
  • Reduced subsidy spending
  • Sustained capital expenditure

5. External Finances:

• Robust external sector with high foreign exchange reserves.
• Current account deficit (CAD) projected at 0.7% of GDP in FY26, rising gradually to 1.5% by FY28.

6. Debt and Fiscal Credibility:

• General government debt estimated to rise slightly to 81.5% of GDP in FY26.
• Long-term goal to reduce debt to 50% of GDP by FY31, though high interest/revenue ratios limit flexibility.

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Key Data Summary

Category	Details
Rating	‘BBB-’ (Stable Outlook)
GDP Growth	6.5% in FY26 (vs. BBB median 2.5%)
Tariff Impact	Modest; U.S. exports only 2% of GDP
Inflation	1.6% in July 2025
Monetary Policy Space	Room for potential rate cuts
Fiscal Deficit	4.8% (FY25) → 4.4% (FY26)
CAD Forecast	0.7% (FY26) → 1.5% (FY28)
Debt Levels	81.5% of GDP (FY26); target 50% by FY31
External Reserves	High; supports external stability

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Broader Context

India’s macroeconomic picture remains strong relative to peers, but global uncertainties, including U.S. trade actions, could dampen sentiment in some sectors. Tariff structures differ by country, product, and trade agreements; for the most accurate and updated rates, businesses should refer to official sources like the WTO or national trade departments.