Fitch Ratings has affirmed India's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a stable outlook. In its statement released on January 16, the ratings agency said, "India is poised to remain one of fastest-growing countries globally in next few years."
It also added that beyond FY24 there is "less certainty on fiscal path and trade-offs between economic growth and consolidation may become more acute."
The agency has made an upward revision to India's growth forecast for fiscal year ending March 2023, with the growth rate now seen at 6.9 percent, as compared to a forecast of 6 percent issued in May last year.
The GDP growth rate would, however, ease to 6.5 percent in fiscal year 2024-25, it said.
On investment, Fitch stated, "Investment is likely to remain a key growth driver, as the government's capex drive is likely to continue and private investment should accelerate gradually. Consumption is likely to moderate further in the near term due to reduced household savings buffers."
Strong growth prospects
The improved health of bank and corporate balance sheets should pave the way for a "positive investment cycle", Fitch said, adding that sustained reforms could support and boost growth prospects, but risks may arise from an uneven implementation record.
Labour market weakness, partly reflected in low female participation, also poses a risk to the outlook, it underlined.
The agency, in its rating action commentary, also highlighted that core inflation has been contained in India. "Core inflation decelerated, reaching 3.7 percent in December from around 6 percent at end-2022, which should help anchor headline inflation. We forecast headline inflation to ease towards 4.7 percent by end-2024 from 5.7 percent in December 2023," it said.
Under this inflation outlook, Fitch expects the Reserve Bank of India (RBI) to cut its policy rate by 75 basis points in FY25.
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