Fitch affirms India FX rating at BBB- with outlook stable
new delhi — Credit rating agency Fitch on Friday affirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB’ with a stable outlook.
“India’s rating balances a strong medium-term growth outlook and favourable external balances with weak fiscal finances and some lagging structural factors, including governance standards and a still-difficult, but improving, business environment,” were the key drivers for the rating, Fitch said in a statement here.
A favourable economic growth outlook continued to support India’s credit profile, Fitch said, even though real GDP growth fell to 6.6 per cent in the fiscal year ended March 31, 2018 (FY18) according to official preliminary estimates, from 7.1 per cent in FY17.
Fitch forecasts growth to rebound to 7.3 per cent in FY19 and 7.5 per cent in FY20, as a temporary drag will fade from the withdrawal of large-denomination bank notes in November 2016 and the introduction of a Goods and Services Tax (GST) in July 2017.
“The GST is an important reform, however, and is likely to support growth in the medium term once teething issues dissipate. India’s five-year average real GDP growth of 7.1 per cent is the highest in the APAC region and among ‘BBB’ range peers. Growth has the potential to remain high growth expected by Fitch in Indian economy in FY19 for a substantial period of time, as convergence with more developed economies can be expected,” the agency said.
Per capita GDP is the lowest among ‘BBB’ range peers (3.2 per cent of the US level versus the ‘BBB’ median of 17.3 per cent) and continued structural reform implementation should enhance productivity. India has the highest medium-term growth potential among the largest emerging markets, according to a recent Fitch analysis.