Refusing to upgrade India's credit rating for the 12th year in a row, Fitch  on Thursday retained its sovereign rating for the country at 'BBB-', the lowest investment grade with a stable outlook, saying a weak fiscal position continues to constrain the ratings and there were significant risks to macroeconomic outlook.

The government has been making a strong pitch to Fitch Ratings for an upgrade after rival Moody's Investors Service in November 2017 gave the country its first sovereign rating upgrade since 2004. Fitch had last upgraded India's sovereign rating from BB+ to BBB- with a stable outlook on August 1, 2006. "Fitch Ratings has affirmed India's long-term foreign-currency issuer default rating (IDR) at 'BBB-' with a Stable Outlook," it said in a statement.

The rating, it said, "balances a strong medium-term growth outlook and favourable external balances relative to peers with weak fiscal finances, a fragile financial sector and some lagging structural factors. Risks to the macroeconomic outlook are significant, and include a drop in credit growth, resulting from further problems in the banking or shadow-banking sector.” "A weak fiscal position continues to constrain India's sovereign ratings." Government debt at close to 70 per cent of GDP, a difficulty to meet deficit target of 3.3 per cent of GDP in the current financial year (2018-19) due to lower revenues including from GST in first half, and expenditures being difficult to control in the run-up to general elections were main reasons for the weak fiscal position, it said.

"The Indian economy continues to exhibit some structural weaknesses relative to peers and is less developed on a number of metrics. Governance standards continue to be weak, as illustrated by a low score for the World Bank governance indicator (47th percentile versus the 'BBB' median of 59th percentile). India's ranking on the United Nations Human Development Index (31st percentile versus the 'BBB' median of 68th percentile) also indicates relatively low basic human development," it said.

While a reduction in general government debt over the medium term and higher sustained investment and growth rates without the creation of macro imbalances could trigger a "positive rating action", a rise in debt burden of the sovereign and loose macroeconomic policy settings that cause a return of persistently high inflation and widening current-account deficits could trigger the opposite rating action, it said.