Credit-rating firm Fitch maintained India’s sovereign rating at ‘BBB-’ on Monday, citing levels of fiscal deficits and debt that are still high, crushing the government’s hopes for a lift in ratings by all three major providers.
This month, S&P upgraded India to ‘BBB’, its first such upgrade in 18 years, prompting the government to respond that it expected other rating houses to follow suit.
Fitch has rated India at ‘BBB-’ since 2006, while Moody’s has retained its ‘Baa3’ rating since June 2020.
India’s government debt burden is “elevated” at its estimate of 80.9%, “well above the 59.6% ‘BBB’ median”, Fitch said, and forecast a slight rise in debt to 81.5% in fiscal 2026.
“If nominal growth persists at below 10%, debt reduction could become challenging,” it added.
The agency expects India’s economy to grow at 6.5% in real terms in financial year 2026, unchanged from fiscal year 2025. U.S. tariffs pose “a moderate downside risk” to this forecast, it said.
India’s April-June fiscal deficit at 17.9% of full-year target
The ratings action comes two days before the United States is set to impose a hefty tariff of 50% on exports of Indian goods. The levy, aimed largely at New Delhi’s oil purchases from Russia, is among the highest rates President Donald Trump has set on any of Washington’s trade partners.
If not negotiated lower, the tariffs on India, higher than on its Asian peers, will reduce “its ability to benefit from supply chain shifts out of China” and “dampen business sentiment and investment”, Fitch said.
Domestic demand will remain solid, helped by the government’s capital spending drive and steady private consumption, it added.
Prime Minister Narendra Modi promised sweeping consumption tax reforms this month to boost the economy as India and the United States remained deadlocked over a trade deal.
Those “proposed goods and services tax (GST) reforms, if adopted, would support consumption, offsetting some of these growth risks,” Fitch said.
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