Fitch affirms India’s credit rating at ‘BBB-‘: Trump’s tariffs seen as ‘moderate’ risk; points to ‘robust growth & solid external finances’
India’s credit rating has been affirmed at ‘BBB-’ with a stable outlook by ratings agency Fitch. The confidence in India’s growth story comes as a booster shot at a time when India faces 50% tariffs from the US for its exports.According to Fitch, India’s ratings benefit from substantial growth and robust external finances. The country’s consistent delivery of growth, coupled with macro stability and enhanced fiscal credibility, indicates progressive improvement in structural metrics, including GDP per capita, Fitch has said.This pattern suggests a potential modest reduction in debt over the medium term. However, fiscal metrics remain challenging, with substantial deficits, debt and debt service compared to ‘BBB’ peers. The rating faces limitations from underdeveloped structural metrics, including governance indicators and GDP per capita, Fitch said.
Trump’s tariffs to have little impact?
“US tariffs are a moderate downside risk to our forecast, but are subject to a high degree of uncertainty. The Trump administration is planning to impose a 50% headline tariff on India by 27 August, although we believe this will eventually be negotiated lower,” Fitch said.“The direct impact on GDP will be modest as exports to the US account for 2% of GDP, but tariff uncertainty will dampen business sentiment and investment. Moreover, India’s ability to benefit from supply chain shifts out of China would be reduced if US tariffs ultimately remain above that of Asian peers. Proposed goods and services tax (GST) reforms, if adopted, would support consumption, offsetting some of these growth risks,” it added.
India’s GDP Growth Robust
The country’s economic prospects remain favourable compared to peers, despite reduced momentum over the past two years. GDP growth projections stand at 6.5% for the fiscal year ending March 2026 (FY26), matching FY25, and exceeding the ‘BBB’ median of 2.5%, Fitch said.“ Domestic demand will remain solid, underpinned by the ongoing public capex drive and steady private consumption. However, private investment is likely to remain moderate, particularly given heightened US tariff risks. There has been a notable slowdown in nominal GDP growth, which we forecast to expand 9.0% in FY26, from 9.8% in FY25 and 12.0% in FY24,” the ratings agency said.“We estimate potential GDP growth of 6.4%, led by strong public capex, a private investment pick-up and favourable demographics. We assume healthy corporate and bank balance sheets will spur an investment acceleration, but this may depend on better visibility over the domestic consumption outlook. The government’s deregulation agenda and GST reforms should support incremental growth. Passage of other significant reforms, especially on land and labour laws, seems politically difficult. Still, some state governments are likely to advance such reforms. India has signed several bilateral trade agreements, but trade barriers remain relatively high,” it added.
