NEW DELHI: Fitch Ratings has retained its negative outlook on India’s sovereign rating that’s barely above junk grade, reflecting concern the country will find it challenging to cut its high public debt.

       That’s in contrast with Moody’s Investors Service and S&P Global Ratings, which both have a stable outlook on India’s sovereign score.

       Fitch highlighted that the country’s general government debt at 89.6% of gross domestic product (GDP) in the financial year ended March 31 is the highest of similar rated emerging-market sovereigns.

       Fitch affirmed the country’s sovereign rating at BBB-, the lowest investment grade. Moody’s and S&P also rate India just one step above junk, at Baa3 and BBB-, respectively.

       “Higher debt levels constrain the government’s ability to respond to shocks and could lead to a crowding out of financing for the private sector,” Fitch said in the note.

       Fitch forecasts the ratio of debt to GDP in India to decline to 86.9% by financial year 2026 based on its assumptions of 10.5% nominal growth and the gradual consolidation of the general government primary deficit to 2.5% of GDP. The ratio would still be well above the 60.3% median for the BBB rating category in 2021 at Fitch.

       The risks related to India’s high public debt are partly offset by its ability to fund its deficits domestically. Foreign-currency debt makes only 6% of total debt compared with 33% median for peers. ― Bloomberg