Fitch Affirms India ‘BBB-’ Rating, Sees 6.4% GDP Growth

India’s economy remains strong despite headwinds from the energy shock. “We forecast GDP growth of 6.4 per cent in the fiscal year ending March 2027 (FY27). This is slower than the average 7.4 per cent over the past three years but is still three times the 2.0 per cent ‘BBB’ median,” Fitch stated.

Healthy corporate and bank balance sheets should support private investment over time, despite recent restraint. The agency noted that India’s economy has been resilient to shocks in recent years, a trend it expects to continue.

“There are residual risks from uncertainty related to the US-Iran conflict, given India’s position as a large net energy importer, but we do not expect a durable risk to growth prospects,” Fitch said.

Headline inflation is rising from the energy shock, but the agency expects it to stay within the Reserve Bank of India’s 2-6 per cent band, averaging 4.1 per cent in FY27 from 2.1 per cent in FY26. Inflation appears anchored, with core inflation steady at around 4 per cent.

Fiscal policy has limited inflation pass-through from the energy shock, reducing pressure on the RBI. Still, Fitch expects the central bank to raise its policy rate by 25 basis points to 5.5 per cent later this year to tackle second-round effects from the energy shock and El Niño risks.

The agency anticipates that an incremental government deregulation agenda will provide a modest tailwind, along with recent GST and labour code reforms. States are also pushing reforms to varying degrees. India is advancing trade openness through numerous bilateral trade agreements and lower trade barriers.

The health of Indian banks continues to improve, with strengthening financial metrics and asset quality underpinned by robust economic growth and steady enhancements to the regulatory framework.

The affirmation underscores Fitch’s confidence in India’s medium-term growth trajectory and macroeconomic management even as near-term energy-related pressures persist.