Fitch affirms India at BBB-, outlook stable

Fitch Ratings Tuesday affirmed India‘s sovereign credit rating at ‘BBB-‘ with stable outlook, saying the country’s rating reflected strengths from a robust growth outlook and resilient external finances that have supported it in navigating the large external shocks in the past year.

Fitch expects the government to push ahead with fiscal consolidation and forecast FY24 deficit target to be set at 6.0% of GDP in the upcoming budget.

It expects a modest fiscal slippage in FY23 with a deficit of 6.6% of GDP (including disinvestment) relative the 6.4% budget target due to higher food and fertiliser subsidies, but revenue growth and expenditure switching will contain the measures’ fiscal toll while allowing capital spending to remain a priority

The general government deficit has receded from its pandemic high of 13.5% of GDP (excluding disinvestment) but is forecast to remain large compared to peers. The rating agency expects the country’s deficit to gradually decline to 9.2% of GDP in FY24 and 8.7% in FY25 on the back of continued declines in central government deficits.