Ratings agency Fitch affirmed India’s rating at 'BBB-' with a stable outlook on August 29, on the back of strong medium term growth outlook and strengthening fiscal credibility.

“Strengthening fiscal credibility from recent achievement of deficit targets, enhanced transparency and buoyant revenues, have increased the likelihood that government debt can follow a modest downward trend in the medium term,” the rating agency noted.

The government set a lower fiscal deficit target of 4.9 percent in the Budget presented on July 23 compared with 5.1 percent set in the Interim Budget.

It also pointed out that the election results also signalled a broad continuity, but the coalition politics is likely to constraint the government’s ability to enact reforms.

“Policy continuity around the infrastructure drive, digitalisation and ease of doing business measures supports growth, but coalition politics and a weakened mandate will likely constrain the government's ability to enact major economic reforms, limiting upside to potential growth,” it said.

The rating agency noted that the Indian economy is expected to expand 7.2 percent in FY25 and projected inflation to cool down to 4.6 percent for the year, further falling to 4.4 percent in FY26.