Fitch Affirms India's Sovereign Rating with Stable Outlook
Fitch Ratings on Monday, August 25, 2025, affirmed India's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a Stable Outlook. The rating agency highlighted India's robust growth and solid external finances as key supporting factors. Fitch forecasts India's GDP growth at 6.5% for the fiscal year ending March 2026 (FY26), a figure consistent with FY25 and significantly above the 'BBB' median of 2.5%. Despite a moderation in momentum over the past two years, India's economic outlook remains strong compared to its peers. Domestic demand is expected to remain solid, driven by public capital expenditure and steady private consumption.
RBI Governor Highlights Robust Macroeconomic Fundamentals
Reserve Bank of India (RBI) Governor Sanjay Malhotra, speaking at the FIBAC 2025 conference in Mumbai, emphasized that the Indian economy is characterized by robust macroeconomic fundamentals. He noted a strong post-COVID rebound, with an average annual growth of approximately 8% over the last four years (2021-22 to 2024-25), supported by strong domestic demand, including private consumption and fixed investment, amidst challenging global conditions. Malhotra also stated that India is projected to become the world's third-largest economy in the coming years. He assured that the RBI is prepared to support sectors potentially impacted by new US tariffs and will continue its monetary policy with objectives of price stability and economic growth.
Concerns Mount Over Impending US Tariffs
A significant development for the Indian economy is the Trump administration's plan to impose a 50% headline tariff on Indian goods starting August 27. This move has prompted the Prime Minister's Office (PMO) to schedule a high-level review meeting on August 26 to discuss support measures for Indian exporters who will face increased cost pressures. While Fitch believes the direct impact on India's GDP will be modest, as exports to the US account for only 2% of GDP, the tariff uncertainty could dampen business sentiment and investment. RBI Governor Malhotra expressed hope that tariff negotiations would minimize the impact, acknowledging that sectors like gems and jewelry, textiles, and MSMEs could be vulnerable.
Indian Equities Close Higher, Led by IT Sector
Indian equity markets concluded Monday's session with gains, influenced by positive global sentiment and expectations of potential US Federal Reserve rate cuts. The BSE Sensex rose by 329.06 points to close at 81,635.91, while the NSE Nifty50 gained 97.65 points, ending at 24,967.75. The IT sector was a top performer, with Infosys, TCS, Tech Mahindra, and HCLTech among the leading gainers.
GST Reforms and Other Key Business Developments
Discussions around Goods and Services Tax (GST) reforms are ongoing, with proposals for a two-tier rate structure (5% and 18% for 'merit' and 'standard' goods/services) and a 40% rate for certain items. The GST Council is slated to meet on September 3 and 4 to deliberate on these changes, including potential reductions in GST on cement and the elimination of GST on individual life and health insurance. In other business news, the sale of IDBI Bank is moving closer after LIC secured SEBI approval. The government is also working on overhauling the Consumer Price Index (CPI) by incorporating data directly from e-commerce platforms like Amazon and Flipkart to better reflect digital shopping trends. Additionally, the CBDT is developing new forms and regulations for the new Income Tax Act, expected by year-end.