Fitch affirms India’s sovereign rating at ‘BBB-’ on robust growth, solid external finances

Fitch Ratings on Monday (August 25, 2025) affirmed India’s sovereign rating at ‘BBB-‘, with a stable outlook, saying a strong record of delivering growth and improving fiscal credibility will drive improvements in structural metrics.

“India’s ratings are supported by its robust growth and solid external finances,” Fitch said, as it forecast GDP growth of 6.5% in the fiscal year ending March 2026 (FY26), unchanged from FY25, and well above the ‘BBB’ median of 2.5%.

It said India’s economic outlook remains strong relative to peers, even as momentum has moderated in the past two years.

“Proposed goods and services tax (GST) reforms, if adopted, would support consumption, offsetting some of these growth risks,” Fitch added.

The Centre has proposed to the Group of Ministers on GST rate rationalisation a 2-tier rate structure of 5 and 18% for ‘merit’ and ‘standard’ goods and services, and a 40 per cent rate for about 5-7 goods. The proposal entails doing away with the current 12 and 28% tax slabs.

“A strengthening record on delivering growth with macro stability and improving fiscal credibility should drive a steady improvement in its structural metrics, including GDP per capita, and increase the likelihood that debt can trend modestly downward in the medium term,” Fitch said in a statement.

Fitch, however, flagged fiscal metrics as a credit weakness, given the high deficits and debt compared to ‘BBB’ peers.

“Lagging structural metrics, including governance indicators and GDP per capita, also constrain the rating,” Fitch said.

On August 14, S&P Global Ratings upgraded India’s sovereign rating by a notch to ‘BBB’, from ‘BBB-‘, with a stable outlook — its first upgrade for India in over 18 years.