New Delhi: Credit ratings firm Fitch Ratings has affirmed India’s sovereign rating at BBB–, a rating the country has near-continuously held for two decades. This is the lowest investment-grade rating tier, implying indifferent impact of most fiscal as well as investment measures such as the Make In India scheme and Semiconductor Mission.The agency explains that its ‘BBB’ ratings indicate that expectations of default risk are low and that the capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.In its latest report, Fitch has cited India’s “robust growth outlook and solid external finance fundamentals”, which it said would hold despite headwinds from energy shocks due to the West Asia conflict. The report notes the recent student protests, saying they “may point to rising concerns among youth over employment”.“There are now BJP-controlled governments in 17 states with coalition partners controlling four others. Recent protests, stemming from leaked medical exams, may point to rising concerns among youth over employment opportunities, risking fiscal spending pressures over time,” the report notes.The Modi government rejigged the MG-NREGA this summer, moving away from guaranteed 100 days of employment in rural areas to the VB-G RAM G, which limits access to work as well as burdens state governments with the payments. The government is increasingly under pressure to reintroduce the employment guarantee Act.At the same time, lack of employment opportunities in the organised urban sectors contributed to bringing youth on the streets in large numbers, opposing the government’s policy failures.A key factor Fitch notes in its report is the risks caused by energy supply and price shocks, which have rocked the Indian economy since the West Asia conflict began in February. “There are residual risks from uncertainty related to the US-Iran conflict, given India’s position as a large net energy importer, but we do not expect a durable risk to growth prospects,” the agency said.It estimated a potential GDP growth of 6.4%, led by public investment and a pickup in private investment. India recorded 7.8% year-on-year GDP growth in the January-March 2026 quarter. The government assured it would spend over Rs 12 lakh crore in Budget 2026-27.Government spending is seen as a bulwark against declining private-sector interest in investment. A recent uptick has been reported in private spending, but alongside the continuing slowdown in consumption.“Healthy corporate and bank balance sheets should support private investment over time, despite recent restraint,” Fitch notes. “We expect an incremental government deregulation agenda to provide a modest tailwind,” it says, recording recent GST and labour code reforms.Recent reports said Prime Minister Narendra Modi has been following up on the BJP’s deregulation agenda under ‘Ease of Doing Business’ while also pursuing reforms through the ‘Viksit Bharat @2047’ plan.“States are also pushing reforms to varying degrees. India is also advancing trade openness with numerous bilateral trade agreements and lower trade barriers,” the Fitch report says.The report notes that inflation was rising in India as a result of the energy shock, but that it expects it to “stay within the Reserve Bank of India’s (RBI) 2%-6% band”. Retail inflation in June touched an 18-month high at 4.4%.The report forecasts debt to “decline slowly” to around 79% by 2031-32, assuming medium-term nominal GDP growth of 10.5%. “We see the GG [general government] deficit declining gradually in the coming years driven by the central government,” it notes.