Overview

• Fitch reaffirmed India’s sovereign rating at BBB- with a stable outlook, citing robust growth prospects and solid external finances.
• The agency projects real GDP growth of 6.5% in FY26 and sees nominal growth slowing to about 9.0%, reflecting softer revenue momentum.
• Proposed US tariffs of up to 50% from August 27 are viewed as a moderate downside risk, with Fitch expecting a negotiated reduction and a modest direct GDP effect given US exports near 2% of GDP.
• Fiscal constraints persist, with general government debt estimated at 80.9% of GDP in FY25 rising to 81.5% in FY26 and an interest-to-revenue ratio near 23.5%, even as the central government deficit is forecast to narrow to 4.4% in FY26 and the general government deficit to 7.3%.
• External buffers remain strong with FX reserves at about USD 695 billion as of August 15 and a current account deficit near 0.7% of GDP in FY26, and low inflation leaves room for one more 25 bp rate cut after the RBI’s 100 bp easing to 5.5% earlier this year.