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    HomeBusinessFitch lauds Indian economic recovery, ups outlook from negative to stable

    Fitch lauds Indian economic recovery, ups outlook from negative to stable


    Fitch Ratings has revised the outlook on India’s long-term foreign-currency Issuer Default Rating (IDR) from “negative” to “stable” on diminished downside risks to medium-term growth. It affirmed the IDR at ‘BBB-‘.

    The revision in outlook reflects India’s rapid economic recovery and easing financial sector weaknesses, despite near-term headwinds from the global commodity price shock. “We expect robust growth relative to peers to support credit metrics in line with the current rating”, Fitch said in a statement.

    “High nominal growth in the gross domestic product (GDP) has facilitated a near-term reduction in the debt-to-GDP ratio. But public finances remain a credit weakness with the debt ratio broadly stabilising, based on our expectation of persistent large deficits”, said Fitch.

    The rating also balances India’s external resilience from solid foreign-exchange reserve buffers against some lagging structural indicators, it added.

    Fitch said that India’s economy continues to see a solid recovery from the Covid-19 pandemic shock. GDP recovered by 8.7 per cent in the fiscal year ended March 2022 (FY22). “We forecast GDP growth to remain robust at 7.8 per cent in FY23 compared with the 3.4 per cent ‘BBB’ median. However, this is a downward revision from our 8.5 per cent forecast in March as the inflationary impacts of the global commodity price shock are dampening some of the positive growth momentum”, it added.

    India’s strong medium-term growth outlook relative to peers is a key supporting factor for the rating and will sustain a gradual improvement in credit metrics.

    “We forecast growth of around 7.0 per cent between FY24 and FY27. This is underpinned by the government’s infrastructure push, reform agenda and easing pressures in the financial sector.

    Nevertheless, there are challenges to this forecast, given the uneven nature of the economic recovery and implementation risks for infrastructure spending and reforms.

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