Fitch Ratings on Tuesday maintained India’s sovereign rating unchanged at “BBB-” with a negative outlook, at the same time noting that it still maintains a strong medium-term growth outlook and resilience from solid foreign reserve buffers against high public debt and a sluggish financial sector.
The rating agency further said that India’s quick recovery from Coronavirus pandemic and easing financial sector pressures are narrowing risks to the medium-term growth outlook.
However, the negative outlook on the rating reflects lingering uncertainty around the medium-term debt trajectory, particularly given India’s limited fiscal headroom relative to rating peers.
“We forecast robust GDP growth of 8.7 per cent in the fiscal year ending March 2022 (FY22) and 10 per cent in FY23 (ending March 2023), supported by the resilience of India’s economy, which has facilitated a swift cyclical recovery from the Delta Covid-19 variant wave in 2Q21,” Fitch said while affirming India at ”BBB-”; with a negative outlook.
Mobility indicators have returned to pre-pandemic levels and high-frequency indicators point to strength in the manufacturing sector.
“The potential remains for a resurgence in coronavirus cases, though we anticipate the economic impact of further outbreaks would be less pronounced than previous surges, particularly given the sustained improvement in the Covid-19 vaccination rate, which has now surpassed 1 billion doses administered,” it said.