New Trade Deals and Fiscal Policy Boost India's Credit Profile

The recently announced trade agreements with the United States and the European Union, alongside the fiscal strategy detailed in the Union Budget 2026-27, uphold India’s sovereign credit profile, as per CareEdge Ratings. The report indicates resilient growth and a measured approach to fiscal consolidation as primary support factors.

The study highlights that the trade deals have reduced external uncertainties while boosting India’s competitiveness globally. CareEdge Ratings underscored that these deals, combined with budgetary fiscal consolidation strategies, strengthen India's credit foundations.

The new trade agreement between India and the US is set to lower tariffs on Indian imports to 18%, down from a significant 50%. This reduction is poised to improve the competitiveness of Indian exports. Together with EU engagements, these steps aim to enhance export diversification and growth in the medium term.

The Union Budget 2026-27 signals a controlled yet focused fiscal consolidation approach, anchored by keeping deficit targets firm and enhancing public capital expenditure. This commitment reinforces medium-term growth potential and contributes to macroeconomic stability.

Despite the challenges posed by high public debt and interest burdens, the report cites strong domestic demand, diverse growth channels, and robust external buffers as sustaining macroeconomic stability. An improved trade scenario coupled with disciplined fiscal policies are expected to bolster India's growth path.

Furthermore, the report notes the critical importance of sustained improvement in revenue collection, successful disinvestment, and effective debt management for maintaining fiscal credibility. These developments, along with the fiscal policy directions in the FY27 Budget, are seen as key factors in maintaining a stable credit profile for India according to CareEdge Ratings.