“The positive outlook reflects our view that continued policy stability, deepening economic reforms, and high infrastructure investment will sustain long-term growth prospects,” S&P said.
Rating firm S&P Global Ratings on Wednesday upgraded India’s sovereign rating outlook to positive from stable and affirmed the overall rating at ‘BBB’, citing robust growth and improved quality of government expenditure. At the same time, it affirmed BBB- long-term and ‘A-3’ short-term unsolicited foreign and local currency sovereign credit ratings.
“The positive outlook reflects our view that continued policy stability, deepening economic reforms, and high infrastructure investment will sustain long-term growth prospects,” S&P said.
Regardless of the election outcome, S&P Global expects broad continuity in economic reforms and fiscal policies. “Irrespective of the June 2024 general election results,we expect the incoming government to carry on economic reforms to support the growth vigor, continued infrastructure investment drive,and commitment to fiscal consolidation,” it added.
BBB- is the lowest investment grade rating. The agency had last upgraded the rating outlook to stable from negative in 2010.
It further stated that it could upgrade India’s sovereign rating in the next 2 years if the country’s fiscal deficits narrow meaningfully such that the net change in general government debt falls below 7 per cent of GDP on a structural basis. The protracted rise in public investment in infrastructure will lift economic growth dynamism that, combined with fiscal adjustments, could alleviate India’s weak public finances. It further stated that it may also raise the ratings if there is a sustained and substantial improvement in the central bank’s monetary policy effectiveness and credibility, such that inflation is managed at a durably lower rate overtime.
Furthermore, S&P Global also stated that it could revise the outlook to stable if there is an erosion of political commitment to maintain sustainable public finances, which in turn signifies a weakening of the country’s institutional capacity. “If current account deficits widen materially to weaken India’s external position such that the country becomes a narrow net external debtor, we could also revise the outlook to stable,” it said.
Source:financialexpress.com