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4d ago

Fitch Reaffirms India at BBB- With Stable Outlook, Flags Tariff Risk With Modest Direct Impact

Low inflation gives the central bank scope for one more 25-basis-point cut this year.

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Fitch affirms India's rating at ‘BBB-’, says direct impact of Trump tariffs on GDP would be modest
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Overview

  • Fitch kept its FY26 real GDP growth forecast at 6.5%, with momentum driven by public capital spending and steady household demand.
  • The proposed US tariff hike of up to 50% from August 27 is deemed a moderate downside risk, with limited direct GDP effect because exports to the US are about 2% of output.
  • Fiscal strains remain pronounced, 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%, alongside a projected central deficit of 4.4% in FY26.
  • External buffers stay strong, including roughly USD 695 billion in FX reserves as of August 15 and a current-account deficit forecast around 0.7% of GDP in FY26.
  • Potential GST rate rationalisation is seen supporting consumption even if slightly revenue-negative, and Fitch expects only a gradual easing of debt ratios over the medium term.