Fitch Retains India’s ‘BBB-’ Rating with Stable Outlook

In its latest review, Fitch Ratings has reaffirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-’ with a stable outlook, citing the country’s robust growth, sound external finances, and a stable macroeconomic framework. The rating decision, released on 25 August 2025, reflects confidence in India’s long-term 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, significantly higher than the BBB median of 2.5%. This resilience is attributed to,

• Strong domestic demand
• Public capital expenditure
• Steady private consumption

While private investment is expected to remain moderate—partly due to global uncertainty and trade risks—India’s structural strengths continue to support its growth trajectory.

Long-Term Structural Gains

Fitch stated that India’s improving macroeconomic credibility, particularly in fiscal consolidation, would enhance structural indicators like GDP per capita and gradually bring down government debt levels over the medium term.

External Risks: US Tariffs and Supply Chains

Tariff Uncertainty

• Fitch flagged moderate downside risks from proposed 50% US tariffs on Indian goods, expected to be effective from 27 August 2025, especially if trade negotiations don’t moderate them.
• Direct impact on GDP is expected to be limited, as exports to the US constitute just 2% of India’s GDP.
• However, business sentiment and foreign investment could be affected.
• India’s ability to capitalize on global supply chain shifts away from China may be undermined if US tariffs remain higher than those imposed on Asian peers.

Macroeconomic Stability: Inflation and Fiscal Trends

Inflation Under Control

Falling food prices and timely action by the Reserve Bank of India (RBI) have helped keep inflation under control,

• Headline inflation dropped to 1.6% in July 2025, largely due to reduced food prices.
• Core inflation remains stable at around 4%, well within the RBI’s 2–6% target band.

RBI Policy Measures

In response to low inflation and softening growth, the RBI cut its policy repo rate by 100 basis points between February and June 2025, bringing it down to 5.5%. Fitch expects a further 25-basis-point cut by the end of the year.