After two years, Fitch Ratings revised its outlook on India’s sovereign rating to stable from ‘negative,’ predicting downside risks to medium-term growth if the economy recovers quickly.
“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,” it said.
However, due to the inflationary impact of the global commodity price shock, the agency reduced its economic growth forecast for the current fiscal year (April 2022 to March 2023) to 7.8 percent from 8.5 percent in March.
According to Fitch, “India’s economy continues to see a solid recovery from the COVID-19 pandemic shock.”
Fitch stated about India’s medium-term prospects, “We forecast growth of around 7% between FY24 and FY27, underpinned by the government’s infrastructure push, reform agenda, and easing pressures on financial risks.” Nonetheless, given the uneven nature of the economic recovery and implementation risks for infrastructure spending and reforms, this forecast faces challenges.”
Previously, the agency revised India’s outlook from ‘stable’ to ‘negative’ in June 2020, citing the coronavirus pandemic as having significantly weakened the country’s growth and exposed the challenges associated with a high public debt burden.
