Fitch Ratings Reaffirms India’s ‘BBB-’ Long-Term Rating with Stable Outlook.
Economy Business
On August 25, 2025, Fitch Ratings, one of the three largest global credit rating agencies, reaffirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-’ with a stable outlook. This rating reflects strong growth fundamentals but highlights risks from high government debt and U.S. tariff threats.
- Fitch Ratings, headquartered in New York and London, recently retained India’s rating at ‘BBB-’, which is the lowest investment-grade rating under the International Credit Rating Scale.
- A ‘BBB’ rating indicates moderate credit risk with adequate repayment capacity, while the minus (-) sign shows the lowest level in that grade. Any downgrade below ‘BBB-’ would push India into speculative or “junk” status, raising borrowing costs and limiting foreign investments.
- The reaffirmation is supported by India’s projected Gross Domestic Product (GDP) growth of 6.5 percent for the fiscal year 2025-26 (FY26), significantly higher than the ‘BBB’ median of 2.5 percent. Growth is being driven by domestic demand, steady private consumption, and public capital expenditure (CapEx) programs initiated by the MoF under Finance Minister Nirmala Sitharaman. Fitch underlined that India’s diversified economy, service sector performance, and external financial stability are key strengths.
Main Point :- (i) However, risks have been highlighted from United States (U.S.) tariff measures, where duties up to 50 percent on certain Indian exports were announced, especially in relation to oil imports from Russia.
(ii) While Fitch expects limited direct impact on GDP, it warned of negative consequences on trade flows and business sentiment. The Ministry of Commerce and Industry (MoCI), led by Union Minister Piyush Goyal, is working on mitigating these challenges through trade diversification.
(iii) On the fiscal side, Fitch projected general government debt at 81.5 percent of GDP in FY26, coupled with high interest-to-revenue ratios. The government, however, has targeted a fiscal deficit reduction to 4.4 percent of GDP this year. Reform proposals, including GST rationalisation into two slabs (5 percent and 18 percent), were noted as steps towards strengthening fiscal sustainability. The agency concluded that while India’s fundamentals are strong, sustained fiscal reforms will be essential for any future rating upgrade.
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