International Rating agency Fitch has affirmed India’s long-term foreign-currency Issuer Default Rating (IDR) at ‘BBB-’ with a negative outlook. The agency also said that India’s rating balances a still strong medium-term growth outlook and external resilience from solid foreign reserve buffers, against high public debt, a weak financial sector, and some lagging structural factors. They further highlighted the lingering uncertainty around the debt trajectory, following the sharp deterioration in India’s public finance metrics because of the pandemic from a previous position of limited fiscal headroom.

Wider fiscal deficits, and government plans for only a gradual narrowing of the deficit, put greater onus on India’s ability to return to high levels of economic growth over the medium term to stabilise and bring down the debt ratio.