S &P upgrades India’s outlook to positive
After a decade, the agency has also elevated the country’s sovereign rating
NEW DELHI: Giving thumbs up to the economic management of the Modi government, S &P Global Ratings after a gap of 10 years upgraded India’s sovereign rating outlook to positive from stable on robust growth, improved quality of public spending in last 5 years and expectation of broad continuity in reforms and fiscal policies.
S&P, however, retained India’s sovereign rating at the lowest investment grade of ‘BBB-’. In a statement on Wednesday, the USbased agency said India’s rating can be upgraded in the next
24 months if the country adopts a cautious fiscal and monetary policy that reduces the government’s elevated debt and interest burden while bolstering economic resilience.
S &P’s rating commentary comes within a week of RBI’s record Rs 2.10 lakh crore dividend transfer to the government. The funds may be used to cut the Centre’s fiscal deficit.
“India outlook revised to positive on robust growth and rising quality of Government spend; BBB- long-term and ‘A-3’ shortterm unsolicited foreign and local currency sovereign credit ratings affirmed,” S &P said.
Sovereign rating is a tool to measure the risk level of a country’s investing environment and shows investors the ability of a country to repay its debts. In 2014, S &P had upped the outlook to stable from negative.
The ratings are looked at by investors as a barometer of the country’s creditworthiness and has an impact on borrowing costs. “Our positive outlook on India is predicated on its robust economic growth, pronounced improvement in the quality of government spending, and political commitment to fiscal consolidation. We believe these factors are coalescing to benefit credit metrics,” S &P said.
It said the composition of government
spending has been transformed, with an increasing share going to infrastructure. This will ease bottlenecks to put the country on a higher growth trajectory.
S &P said India’s robust economic expansion is having a constructive impact on its credit metrics. “We expect sound economic fundamentals to underpin the growth momentum over the next two to three years. Regardless of the election outcome, we expect broad continuity in economic reforms and fiscal policies,” S &P said.
The positive outlook reflects S &P’s view that continued policy stability, deepening economic reforms,
and high infrastructure investment will sustain long-term growth prospects.
“That, along with cautious fiscal and monetary policy that diminishes the government’s elevated debt and interest burden while bolstering economic resilience, could lead to a higher rating over the next 24 months,” S &P said.
The Indian economy has staged a “remarkable comeback” from the COVID-19 pandemic, S &P said, adding it forecasts India’s real GDP growth at 6.8 pc this year, which compares favourably with emerging market peers amid a broad global slowdown.
Positive outlook on India is predicated on its robust economic growth, pronounced improvement in the quality of government spending, says S&P