Fitch rules out rating upgrade, but says fiscal targets realistic  

Mumbai: International rating agency Fitch has said the fiscal numbers – 4.8% fiscal deficit for this fiscal and 4.4% for the next– proposed in the Budget 2025 looks realistic and achievable.

“The fiscal deficit projections in the budget appear realistic and we believe the targets will be achieved. Nevertheless, there may be some modest slippages on revenue collection amid the moderation in economic growth, which will likely require some further expenditure restraint,” Jeremy Zook, director and primary sovereign analyst for India at Fitch Ratings, said in a note on Monday.

On the rating impact of the Budget, he said; “Sustained deficit reduction, meeting of fiscal targets and continued adherence to transparency further bolsters India’s improving fiscal credibility, as we noted when we affirmed the ‘BBB-’ rating with a stable outlook in August 2024. That said, fiscal metrics remain weak relative to peers, with general government deficits, debt and debt service burdens all well above peer medians.”

The government provided greater clarity on its medium-term fiscal strategy, which is helpful for our assessment of the fiscal path. The government will aim to manage fiscal deficits so as to keep its debt on a gradual downward trend to 50% of GDP by FY31, roughly 7% of GDP lower than FY25.

Such a path would require fiscal deficits to be sustained at or just below the 4.4% deficit target in FY26 and is highly dependent on nominal GDP growth outcomes. On a general government basis, including the states, which we track for the rating it would imply deficits of around 7% and debt in the low 70% range by FY31, he said.