Fitch affirms India at ‘BBB-’ despite tariff risks

Private investment is likely to remain moderate, particularly given heightened US tariff risks

FPJ News Service mumbai

Fitch Ratings on Monday affirmed India’s long-term foreign-currency issuer default rating at ‘BBB-’ with a stable outlook.“US tariffs are a moderate downside risk to our forecast, but are subject to a high degree of uncertainty. The Trump administration is planning to impose a 50% headline tariff on India by August 27, although we believe this will eventually be negotiated lower,” Fitch said.

The direct impact on GDP will be modest as exports to the US account for 2% of GDP, but tariff uncertainty will dampen business sentiment and investment. Moreover, India's ability to benefit from supply chain shifts out of China would be reduced if US tariffs ultimately remain above that of Asian peers.  

India’s ratings are supported by its robust growth and solid external finances. A strengthening record on delivering growth with macro stability and improving fiscal credibility should drive a steady improvement in its structural metrics, including GDP per capita, and increase the likelihood that debt can trend modestly downward in the medium term.

Still, fiscal metrics are a credit weakness, with high deficits, debt and debt service compared with 'BBB' peers. Lagging structural metrics, including governance indicators and GDP per capita, also constrain the rating. “We forecast GDP growth of 6.5% in FY26, unchanged from FY25, and well above the ‘BBB’ median of 2.5%.