Fitch changes India's outlook from negative to stable and maintains the BBB- rating

10 Jun 2022 , 03:12 PM

Fitch Ratings is a credit rating agency that assesses investment feasibility in relation to the risk of default. Fitch, along with Moody’s and Standard & Poor’s, is one of the top three credit rating firms in the world.

On June 10 Fitch said “The Outlook revision reflects our view that downside risks to medium-term growth have diminished due to India’s rapid economic recovery and easing financial sector weaknesses, despite near-term headwinds from the global commodity price shock,”. They also added,”We expect robust growth relative to peers to support credit metrics in line with the current rating,”.

Although Fitch changed its expectations of growth for the country from 3.4% to 7.8%, it maintained a rating of BBB for the country. According to the first tentative estimate from the statistics ministry, India’s GDP expanded 8.7% in FY22, with the Reserve Bank of India (RBI) projecting growth of 7.2 percent in FY23. As a result, Fitch’s projection differs from the central bank’s by 60 basis points.

The agency’s newest growth prediction, however, is 70 basis points lower than what it predicted in March, with strong global inflation “dampening some of the positive growth momentum.”

Fitch rated India’s medium-term growth prospects as “strong” compared to other similar economies. Between FY24 and FY27, it predicts growth of roughly 7%.Fitch expects the RBI to raise the repo rate to 6.15 percent by FY24 in order to combat inflation, which it expects to average 6.9 percent in FY23 – 20 basis points lower than the central bank’s prediction.