Senior officials led by chief economic advisor V Anantha Nageswaran will hold a meeting with Fitch executives on Thursday, a senior official told ET. “Meetings with other agencies will take place in the coming days, in which we will seek a similar upgrade,” he added.
Fitch has retained its sovereign rating for India at the lowest investment grade of ‘BBB-‘ for more than 16 years now. In June 2022, Fitch revised up its outlook for India’s long-term foreign currency issuer default rating (IDR) to ‘stable,’ from ‘negative,’ after a gap of two years.
Robust growth
S&P and Moody’s have also maintained such ratings for India at the same level – ‘BBB-‘ and ‘BAA3’, respectively – with a ‘stable’ outlook.
“India’s macro fundamentals have improved significantly since the Covid outbreak. India is the fastest-growing major economy this fiscal and the next. Inflation (is) still at a manageable level, having remained below levels witnessed in some advanced economies. Fiscal deficit has been easing and the Centre is committed to reducing it further to 4.5% of GDP (from 6.4% in FY23) in FY26. The current account deficit (CAD) fears, too, have eased considerably now,” said the official.
Given the back-to-back external shocks, such as the pandemic, Ukraine-Russia hostilities and interest rate tightening by key central banks, “this is no mean achievement,” he added.‘Weak public finances’
In their latest assessments, global rating agencies have acknowledged India’s robust growth outlook compared to peers and still-resilient external finances. However, they have also flagged “weak public finances,” reflected in high deficits and debt relative to peers.
The International Monetary Fund (IMF) has pegged India’s economic growth at 6.8% for this fiscal and 6.1% for the next. Retail inflation eased a tad to 6.44% in February from 6.52% in the previous month. It has remained lower than the levels in some advanced economies for months now. Given the moderation in imports, CAD is now expected to remain below 3% of GDP in FY23, against the earlier projections of 3-3.5%.
Of course, the big pandemic stimulus and the contraction in the economy worsened the combined Centre and state debt-to-GDP ratio to 89.2% in FY21 from 75.1% in FY20. But the IMF has forecast the ratio will improve to 83.5% of GDP in FY23 and gradually ease from FY26 onwards.
More importantly, India’s external debt-to-GDP ratio is at a very comfortable level. For the central government, it is estimated at just 2.6% in FY23, much better than in peer economies.