Similarly, India’s rating balances a still strong medium-term growth outlook and external resilience from solid foreign-reserve buffers against lags in structural factors. Fitch said wider fiscal deficits and government plans for a gradual tapering of the deficit put greater onus on India's ability to return to high levels of GDP growth over the medium term to stabilise and bring down the debt ratio.
“We expect inflation to decline to an average of 4.4 per cent in FY22 after hovering above the Reserve Bank of India's (RBI's) 2 to 6 per cent target band for much of FY21. Price pressures have moderated even though both headline and core inflation remain near the upper end of the band,” the agency said.
Fitch also said it expects the RBI to keep the policy rate stable in the coming year following 115 basis points in cuts since March 2020.