India will be one of the fastest-growing Fitch-rated sovereigns globally with 6% expansion in real GDP in the fiscal year ending March 2024 (FY24), supported by resilient investment prospects, Fitch said.
Global rating agency Fitch on Monday affirmed India‘s sovereign credit rating at ‘BBB-‘ with a stable outlook, citing a robust growth outlook and resilient external finances.
“India’s rating reflects strengths from a robust growth outlook compared with peers and resilient external finances, which have supported India in navigating the large external shocks over the past year,” Fitch said.
However, these are offset by India’s weak public finances, illustrated by high deficits and debt relative to peers, as well as lagging structural indicators, including World Bank governance indicators and GDP per capita, it said.
India will be one of the fastest-growing Fitch-rated sovereigns globally with 6% expansion in real GDP in the fiscal year ending March 2024 (FY24), supported by resilient investment prospects, Fitch said.
In January, the agency had projected India’s FY24 growth at 6.2%.“Still, headwinds from elevated inflation, high interest rates and subdued global demand, along with fading pandemic-induced pent-up demand, will slow growth from our FY23 estimate of 7% before rebounding to 6.7% by FY25.”
Moody’s has also kept India in the lowest investment grade rating ‘Baa3’ with a stable outlook. S&P too has similar rating and outlook concerning India.
Fitch said sustained improvements in asset quality and profitability have led to a strengthening of Indian bank balance sheets on the back of the economic recovery. This has created headroom to absorb risks as pandemic-related forbearance measures continue to unwind in FY24. Banks appear well-positioned to support sustained credit growth if capitalisation is well-managed, it said.
It has forecast headline inflation to decline, but remain near the upper end of the Reserve Bank of India’s 2%-6% target band, averaging 5.8% in FY24 from 6.7% last year.
“We expect the general government deficit (excluding divestments) to narrow to a still-high 8.8% of GDP in FY24 (2023 BBB median: 3.6%) from 9.2% in FY23,” Fitch said. It said the central government will be able to meet its Budget’s planned reduction in the deficit to 5.9% of GDP in FY24 from 6.4% in FY23.
However, it said even though the central government has affirmed the medium-term fiscal guidance to bring down fiscal deficit to 4.5% of GDP by FY26, it has provided limited details on how this would be reached.
Source:financialexpress.com