 "Fitch Ratings")
Global rating agency Fitch today affirmed India's sovereign rating at “BBB-“, backed by a strong medium-term growth outlook and favourable external balances. It, however, flagged concerns over a weak fiscal position and a yet difficult business environment in the country.
However, the business environment is likely to gradually improve with implementation and continued broadening of the government's structural reform agenda, rating agency said in statement.
India exhibits one of the highest real Gross Domestic Product (GDP) growth rates in the sovereigns space. Its five-year average growth is among the 10 highest of all rated sovereigns. The economic growth rate of 7.6 per cent for FY16 exceeds the 'BBB' category median of 3.3 per cent.
The GDP growth is expected to slightly accelerate to 7.7 per cent in FY17 and 7.9 per cent in FY18. The pace is driven by an expected pick-up in consumption in both urban and rural areas after a civil-servant wage hike of 24 per cent and the strong likelihood of stronger rainfall. The country had witnessed poor monsoon is last two years.
Policy rate cuts of 150 basis points in total since January 2015 may also contribute to growth, even though weak bank balance sheets continue to impair monetary transmission.
At the same time, weak private investment indicates that the economy is still not firing on all cylinders.Fitch also expects the government's continued structural reform push to support GDP growth in the medium term.
