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On December 20, 2022, Fitch Ratings maintained its rating for India at “BBB-” with a stable outlook, although it expected a modest “fiscal slippage” this year from the fiscal deficit target central government from 6.4% of GDP to 6.6% of GDP, due to higher food and fertilizer subsidies.

Despite the slippage, Fitch expects India’s general government deficit to narrow slightly to 9.6% of GDP in 2022-23, from 9.8% last year. That’s lower than the 10.5% of GDP the global ratings major had forecast in June 2022, and was “largely because state deficits have shrunk much faster than expected.”

Earlier this month, the rating agency reiterated India’s GDP growth estimate of 7%, but lowered its growth projection for 2023-24 to 6.2% from 6.7 % planned earlier. Its latest rating action attributes the cut in next year’s growth estimate to “lower exports, heightened uncertainty and higher interest rates” as well as a moderation in US growth. consumption “as pent-up demand fades”.

As risks emanating from labor market participation dynamics, lagging rural sector recovery and uneven reform implementation persist, Fitch said its rating was largely boosted by strong growth prospects. India’s medium-term outlook, with improving corporate and bank balance sheets likely to facilitate an “acceleration”. investment in the years to come.

A ‘BBB’ rating indicates that default risk expectations are currently low and the ability to pay financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair that ability.