Fitch Ratings reiterated its BBB- rating with a stable outlook on India’s long-term national debt, stating that growth prospects have improved as the private sector appears to be prepared for stronger investment growth. According to the rating agency, this is due to recent improvements in corporate and bank balance sheets, which have been aided by the government’s infrastructure initiative.
Fitch Ratings stated that India would be one of the fastest-growing sovereigns in the world, with a 6% GDP growth outlook for FY24, supported by solid investment prospects. However, it noted that there were challenges, including high-interest rates, low global demand, waning pandemic-induced pent-up demand, and increased inflation.
According to Fitch, “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”.
The report stated, “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”, adding that growth was anticipated to bounce back to 6.7% by FY25. The financial industry was in a very good place, according to the report.
On the back of the economic recovery, sustained improvements in asset quality and profitability have resulted in a strengthening of bank balance sheets. Banks appear to be well-positioned to provide continued lending growth if capitalisation is well-managed.
While inflation is predicted to fall, it will stay towards the top end of the Reserve Bank of India’s target band, averaging 5.8% in FY24, down from 6.7% last
