“India’s ratings are underpinned by its strong medium-term growth outlook, which will continue to drive improvement in structural aspects of its credit profile, including India’s share of GDP in the global economy, as well as its solid external finance position,” the ratings agency said in its commentary on the move.
The agency added that India is set to remain amongst the fastest-growing economies in the world, pointing to public infra as a key growth driver, saying that it forecasts “GDP growth of 7.2% in the fiscal year ending March 2025 (FY25) and 6.5% in FY26, down slightly from 8.2% in FY24.”
Public infrastructure capex remains a key growth driver and has improved spending quality, helping mitigate the drag from fiscal consolidation. Private investment in real estate is likely to remain strong and there are signs of a nascent pick-up in manufacturing investment.
While the agency pointed to a positive investment cycle, it also added that there was the risk of the private investment “weighing on job creation and dampening potential benefits from India’s demographic dividend,” if the investment cycle does not materialise.