India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) has been confirmed by Fitch Ratings at ‘BBB-‘ with a stable outlook. The ratings agency stated in a statement on January 16 that “India is poised to remain one of the fastest-growing countries globally in the next few years.”
There is “less certainty on fiscal path and trade-offs between economic growth and consolidation may become more acute” beyond FY24, it continued.
India’s growth rate is now expected to be 6.9 percent for the fiscal year ending in March 2023, up from an estimate of 6 percent released in May of last year, according to an upward revision made by the agency.
But in the fiscal year 2024–2025, the GDP growth rate would decrease to 6.5 percent, it stated.
According to Fitch, “investment is likely to remain a key growth driver as private investment should gradually accelerate and the government’s capex drive is likely to continue.” Because there are fewer household savings buffers, consumption is probably going to moderate further in the near future.”
A “positive investment cycle” should be facilitated by the improved health of bank and business balance sheets, according to Fitch. It also added that while consistent reforms could support and enhance economic prospects, there may be concerns associated with an uneven implementation record.
It also emphasized that low female participation, which is a reflection of the labor market’s weakness, presents a risk to the forecast.
The rating agency also noted that India’s core inflation has been kept under control in its rating action comments. “Core inflation slowed, from roughly 6% at the end of 2022 to 3.7 percent in December. This could help stabilize headline inflation. According to our projection, headline inflation will drop from 5.7% in December 2023 to 4.7% by the end of 2024.
Fitch anticipates that the Reserve Bank of India (RBI) would lower its policy rate by 75 basis points in FY25 in light of this inflation prediction.