Fitch revises India GDP forecast downwards to 7.8% for FY23; outlook 'stable'

Fitch Ratings revised its outlook on India's long-term foreign currency Issuer Default Rating (IDR) to "Stable" from "Negative," citing diminished downside risks to medium-term growth.

"The outlook revision reflects our view that downside risks to medium-term growth have diminished due to India's rapid economic recovery and easing financial sector weaknesses, despite near-term headwinds from the global commodity price shock," it wrote in a note on Friday.

Fitch has revised India's GDP growth at 7.8% in the ongoing fiscal, down from the 8.5% forecast earlier. It sees India's growth at around 7% between FY24 to FY27.

Fitch sees the Reserve Bank of India (RBI) raising the repo rate to 6.15% by FY24.

"India's strong medium-term growth outlook relative to peers is a key supporting factor for the rating and will sustain a gradual improvement in the credit metrics," it added.

However, the agency warned that there are challenges to its forecast, given the uneven nature of the economic recovery and implementation risks for infrastructure spending and reforms.