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Business News/ Economy / Fitch affirms India's long-term foreign currency issuer default rating at 'BBB-'; outlook stable
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Fitch affirms India's long-term foreign currency issuer default rating at 'BBB-'; outlook stable

However, the agency flagged that India's weak public finances were the 'largest constraint' to the rating.

FILE PHOTO: The Fitch Ratings' logo is seen at its office in the Canary Wharf financial district in London. . REUTERS/Reinhard Krause/File Photo (REUTERS)Premium
FILE PHOTO: The Fitch Ratings' logo is seen at its office in the Canary Wharf financial district in London. . REUTERS/Reinhard Krause/File Photo (REUTERS)

Global ratings agency Fitch on January 16 affirmed India's long-term foreign currency issuer default ratings at 'BBB-' with a stable outlook, reported news agency Reuters.

However, the rating agency also flagged that India's weak public finances were the 'largest constraint' to the rating.

Fitch expects the Indian government to achieve its fiscal deficit target of 5.9% of gross domestic product in fiscal year 2024 from 6.4% in fiscal year 2023. But the goal to reduce that deficit to 4.5% by fiscal year 2026 will be challenging.

"Beyond FY24 there is less certainty on the fiscal path and trade-offs between economic growth and consolidation may become more acute," Fitch said.

ALSO READ: Fitch expects India to be among fastest-growing nations in 2024-25

Earlier, the global ratings agency estimated that India's economy will grow 6.9% this fiscal year ending March 2024 and by 6.5% the year after and forecast headline inflation will ease towards 4.7% by the end of 2024 with a 75 basis points policy rate cut by the central bank in fiscal year 2025.

"Demand will remain strong for cement, electricity, and petroleum products, with high-frequency data in 2023 sustained at well above pre-Covid-19 pandemic levels," Fitch had said in a report on December 22, 2023.

“India's rising infrastructure spending will also boost steel demand. Car sales will continue to rise, despite our expectation of moderation after robust growth in 2023," it added.

India is currently the world's fifth-largest economy, following the US, China, Germany, and Japan. By 2030, India's GDP is projected to exceed Japan's, making India the second-largest economy in the Asia-Pacific region.

India's robust economic growth will boost demand at corporations, despite weakness from slowing growth in key overseas markets, said the rating agency.

Rising demand in the economy will help maintain industry balance in the cement and steel sectors, despite a faster pace of new capacity additions, the rating agency added.

"We believe India's structural demand visibility, supply-side reform by the government, and healthier corporate and bank balance sheets will enable a further increase in capex across most sectors following an uptick in FY23," Fitch said.

With agency inputs. 

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Published: 16 Jan 2024, 09:55 PM IST
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