Fitch affirms India’s BBB– rating with a stable outlook, citing strong growth, fiscal stability, and moderate inflation in 2025–26.
Overview
Fitch Ratings reaffirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-’ with a stable outlook, highlighting robust growth, sound external finances, and a stable macroeconomic framework. The decision, announced on 25 August 2025, reflects confidence in India’s economic fundamentals despite short-term risks.
Growth Outlook and Structural Strengths
GDP Projections
- Fitch estimates India’s GDP growth at 6.5% in both 2024–25 and 2025–26, surpassing the BBB median of 2.5%.
- Key drivers include strong domestic demand, public capital expenditure, and steady private consumption.
Long-Term Structural Gains
- Fitch acknowledges India’s improving macroeconomic credibility, foreseeing enhanced structural indicators and reduced government debt levels over time.
External Risks: US Tariffs and Supply Chains
Tariff Uncertainty
- There are moderate downside risks from proposed 50% US tariffs on Indian goods, effective from 27 August 2025.
- Fitch notes limited direct impact on GDP as US exports account for just 2% of India’s GDP.
- However, business sentiment and foreign investment could be impacted.
Macroeconomic Stability: Inflation and Fiscal Trends
Inflation Under Control
- Thanks to falling food prices and RBI interventions, inflation remains under control.
- Headline inflation dropped to 1.6% in July 2025.
RBI Policy Measures
- The RBI cut its repo rate by 100 basis points between February and June 2025, with further cuts expected.
Key Takeaways for Competitive Exams
- India’s ‘BBB-’ rating with a stable outlook reflects its robust growth and sound macroeconomic policies.
- Strong domestic demand and public expenditure are driving India’s GDP growth above the BBB median.
- Concerns over US tariffs and supply chain shifts pose external risks to India’s economy.
- The RBI’s measures aim to maintain inflation within target bands and support economic growth.
