On Thursday, Fitch retained the sovereign rating for India at 'BBB-' for the thirteenth year in a row. The lowest investment grade was given with a stable outlook citing a weak fiscal position of the country that continues to constrain its rating.
Back in August 2006, the global rating agency had last upgraded India's sovereign rating from 'BB ' to 'BBB-' with a stable outlook.
These sovereign ratings help investors get an idea on the risk associated with investing in a particular country. It describes the nation's ability to meet its debt obligations. BBB- and above rating is considered "investment grade" (more like to meet debt obligations) while ratings below that are considered "speculative grade" (more likely to default).
"India's ratings balance a strong medium-term growth outlook and relative external resilience stemming from strong foreign reserve buffers, against high public debt, a weak financial sector and some lagging structural factors," it said in a statement.
Fitch believes that a robust growth outlook continues to support India's credit profile and expects a growth of 6.8 percent in the current fiscal year and 7.1 percent in the next with support from accommodative monetary policy, easing of bank regulations, and government spending.
"A weak fiscal position continues to constrain India's sovereign ratings. In this regard, the next government's medium-term fiscal policy will be of particular importance from a rating perspective," Fitch said while affirming the country's long-term foreign-currency Issuer Default Rating (IDR) at 'BBB-' with a stable outlook.
It further said that the general elections, that will be held between 11 April to 19 May 2019, could bring in some temporary uncertainty with regard to the policy agenda. It added that over the past 30 years, governments of different political persuasions have been generally reform-minded.