Fitch Ratings on Tuesday says it has affirmed India's long-term foreign-currency issuer default rating (IDR) at ‘BBB-’ with a negative outlook, unchanged from its previous review. It also said that the rating balances a still-string medium-term growth outlook and external resilience from solid foreign-reserve buffers against high public debt, a weak financial sector, and some lagging structural issues.
The medium-term growth outlook is facing narrowed risks due to the economy gradually recovering from the coronavirus disease (Covid-19). The medium-term debt trajectory also faces lingering uncertainty around it due to the negative outlook on the rating, especially in view of India's limited fiscal headroom relative to rating peers. This is important since according to Finch, India's strong medium-term growth outlook relative to peers is a key supporting factor for rating.
“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,” the PTI news agency cited a Fitch statement.
The ratings have, however, indicated a growth in the manufacturing sector – as seen by mobility indicators returning to pre-pandemic levels. Finch also acknowledged the role India's vaccination campaign against Covid-19 has played, noting that any potential outbreaks in the future is expected to be less severe due to the inoculation rate.
{{/usCountry}}The ratings have, however, indicated a growth in the manufacturing sector – as seen by mobility indicators returning to pre-pandemic levels. Finch also acknowledged the role India's vaccination campaign against Covid-19 has played, noting that any potential outbreaks in the future is expected to be less severe due to the inoculation rate.
{{/usCountry}}It said, “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 one billion doses administered.”
Last month, another global rating agency Moody's Investors Service had affirmed India's sovereign rating and upgraded the country's outlook to ‘stable’, from ‘negative’ citing receding downside risks to the economy and financial system.