Fitch maintains rating on India at ‘BBB-’, citing strong growth

Credit-rating firm Fitch on Monday maintained its long-term foreign-currency issuer default rating on India at ‘BBB-’, citing the country’s strong economic growth and resilient external finances.

“India’s economic outlook remains strong relative to peers, even as momentum has moderated in the past two years,” Fitch said in a statement.

The agency forecast GDP growth of 6.5 per cent for the fiscal year ending March 2026 (FY26), unchanged from FY25, and well above the ‘BBB’ median of 2.5 per cent.

Fitch’s rating comes days after S&P Global Ratings lifted its sovereign credit rating on India, citing strong economic growth, marking its first upgrade in 18 years.

Economic Affairs Secretary Anuradha Thakur had then said she expects other rating agencies to take note of the factors behind S&P’s upgrade and follow suit.

Domestic demand will remain “solid” helped by the government’s ongoing capital spending drive and steady private consumption, Fitch said, but flagged that private investment will remain moderate due to risks from US tariffs.

US President Donald Trump has threatened to double tariffs on Indian goods to 50 per cent - among the highest rates imposed on Washington’s trade partners - targeting India’s oil purchases from Russia. The 50 per cent tariffs are set to kick in from August 27. “US tariffs are a moderate downside risk to our forecast,” Fitch said, adding that they will reduce India’s ability to benefit from supply chain shifts out of China if tariff levels fail to be negotiated lower.

“Proposed goods and services tax (GST) reforms, if adopted, would support consumption, offsetting some of these growth risks,” Fitch added, referring to the tax restructuring promises made by Indian Prime Minister Narendra Modi earlier this month.

Meanwhile India’s foreign minister said on Saturday that trade negotiations with Washington are continuing but there are lines that New Delhi needs to defend, just days before hefty additional US tariffs are due to hit.

Indian goods face additional US tariffs of up to 50 per cent, among the highest imposed by Washington, due to its increased purchases of Russian oil.

A 25 per cent tariff has already come into effect, while the remaining 25 per cent is set to be enforced from August 27.

A planned visit by US trade negotiators to New Delhi from August 25-29 has been called off, dashing hopes that the levies may be lowered or postponed.

“We have some redlines in the negotiations, to be maintained and defended,” Indian Foreign Minister Subrahmanyam Jaishankar said at an Economic Times forum event in New Delhi, singling out the interests of the country’s farmers and small producers.

India-U.S. trade talks collapsed earlier this year due to India not agreeing to open its vast agricultural and dairy sectors. Bilateral trade between the world’s largest and fifth largest economy is worth over $190 billion.

“It is our right to make decisions in our ‘national interest’,” Jaishankar said.

Analysts at Capital Economics said on Friday that if the full US tariffs come into force and stick, the hit to India’s economic growth would be 0.8 percentage points both this year and next.

“The longer-term harm could be even greater as a high tariff could puncture India’s appeal as a global manufacturing hub.”

The Indian minister described US President Donald Trump’s policy announcements as “unusual”.

“We have not had a US president who conducts his foreign policy so publicly as the current one and (it) is a departure from the traditional way of conducting business with the world,” Jaishankar said.

He also said Washington’s concern over India’s Russian oil purchases was not being applied to other major buyers such as China and European Union.

“If the argument is oil, then there are (other) big buyers. If argument is who is trading more (with Russia), than there are bigger traders,” he said.

Russia-European trade is bigger than India-Russia trade, he added.

The minister also said India’s purchases of Russian oil had not been raised in earlier trade talks with the US before the public announcement of tariffs.

Meanwhile Indian Prime Minister Narendra Modi’s push to slash consumption taxes on everyday goods could deliver billions of dollars in annual relief and boost demand in an economy bracing for painful US tariffs, experts say.

US President Donald Trump has threatened to double import duties on India from 25 to 50 per cent to punish New Delhi for buying oil from Russia, saying the purchases help Moscow fund its invasion of Ukraine. The prospective measure has clouded the outlook for the world’s fifth-largest economy, with Indian exporters warning of plunging orders and severe job losses.

Reuters