The global rating agency also raised various concerns, including weak private investment and monetary policy transmission.
"The affirmation of India's sovereign ratings balances a strong medium-term growth outlook and favourable external balances against a weak fiscal position and still-difficult business environment.
"However, the latter is likely to gradually improve with implementation and continued broadening of the government's structural reform agenda," it said in a statement.
Fitch said India exhibits one of the highest real GDP growth rates in the sovereigns space.
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Referring to policy rate cuts of 150bp by RBI in total since January 2015 "may also contribute to growth", even though weak bank balance sheets continue to impair monetary transmission.
Fitch also expects the government's continued structural reform push to support GDP growth in the medium term.
Passage of Bankruptcy Code in both houses of Parliament in May 2016 showed that big-ticket reforms are possible in India, even though the government's proposal for a Goods and Services Tax has thus far not passed in Rajya Sabha, it said.
Those reforms that only require executive approval continue to be rolled out and some legislative reforms are being pursued at the state level.
On rate of price rise, it said inflation has substantially come down in the past two years, even though it started to pick up again in recent months to 5.8 per cent in June on the back of food price pressures.
Fitch expects inflation to remain below the five-year average of 7.8 per cent.