India’s rating outlook revised from Negative to Stable

Fitch Ratings India: India’s sovereign rating was revised to Stable from Negative by Fitch Ratings on June 10, 2022 as downside risks to medium-term growth diminished due to India’s rapid economic recovery.

Fitch Ratings released a statement saying that the Outlook revision reflects their 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.

The credit rating agency stated that they expect robust growth relative to peers to support credit metrics in line with current rating. 

Fitch Ratings revises the outlook on India’s sovereign rating to ‘stable’ from ‘negative’. pic.twitter.com/BiJ8lg7ZIt

— ANI (@ANI)
June 10, 2022

Key Drivers of India’s Rating

Rapid Economic Recovery: The agency noted that India’s economy continues to see a solid recovery from the COVID-19 pandemic shock. It noted how India’s GDP recovered by 8.7 percent in FY 22. 

High Nominal GDP growth: Fitch noted that high nominal GDP growth has facilitated a near-tern reduction in the debt-to-GDP ratio but public finances remain a credit weakness with debt ratio broadly stabilising. 

India’s Forex Reserves: India’s soveriegn rating also balances its external resilience from solid foreign exchange reserve buffers against some lagging structural indicators.

Solid medium-term growth prospects: India’s strong medium-term growth prospects is a supporting factor for India’s current rating and will sustain a gradual improvement in credit metrics.Fitch Ratings has forecasted GDP growth of 7 percent between FY 24 and FY 27, depending on the Indian’s government’s reform agenda, infrastructure push and easing financial sector pressures. 

India’s GDP forecast revised downwards

Fitch Ratings cut India’s GDP growth forecast to 7.8 percent in FY23 in comparison to the earlier 8.5 percent GDP growth forecast in March due to the inflationary impact of global commodity price shock that has dampened some of the growth momentum.