Categories: Economy

India’s Credit Rating Upgraded From ‘Stable’ To ‘Positive’, S&P Indiactes A Positive Uptick

Credit Rating India

The Indian economy has been on a bull run and the preceding decade has been a testament to that. There has been an increase in investment in the Indian diaspora which has been at the backdrop of improved infrastructure and better licensing provisions for foreign companies who want to establish themselves in India. All this has a positive impact on the overall buying and spending in the economy resulting in higher circulation of money in the system.

S&P Gives A Positive Outlook

In a recent development S&P Global, the premier rating agency has changed India’s Sovereign rating outlook from stable to positive after a gap of 14 years. Major fiscal reforms and appropriate public spending stand as pillars of this development. However, the rating agency has retained the sovereign rating at the lowest investment grade ‘BBB-‘.

In a statement released on Wednesday, the US-based agency mentioned that India’s rating could see an upgrade within the next 24 months. This would be possible if the country implements a careful fiscal and monetary policy focused on lowering the government’s significant debt and interest burden, while also strengthening its economic resilience. This rating disclosure comes within a week from when RBI released a 2.10 lakh crore dividend to the government. The funds would be utilized to cover up the fiscal deficit.

“India outlook revised to positive on robust growth and rising quality of Government spend; BBB- long-term and ‘A-3’ short-term unsolicited foreign and local currency sovereign credit ratings affirmed,” S&P said.

S&P stated that India’s robust economic expansion is positively influencing 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.

“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.

Future Growth Prospects

A 7 per cent growth annual is expected from the nation as per rating agencies’ analysis if the current growth trajectory and policy measures are followed. This will be followed by a moderating effect on the government’s debt-to-GDP ratio.

The agency estimates that real GDP growth in the past three years has averaged 8.1 per cent annually, the highest in the Asia-Pacific region. The analysis also points towards the fact that the government can narrow its fiscal deficit and the share is expected to decrease from 7.9% of GDP in fiscal 2025 to 6.8% by fiscal 2028.

The rating agency has also iterated that it can readjust the country’s rating in the next 24 months if a cautious fiscal and monetary policy aimed at reducing the government’s high debt and interest burden while enhancing economic resilience is kept in the backdrop. “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 Election Angle

The world’s largest democratic exercise has been unfolding in the country, the results of which are on June 4th and investors are eying the results and hoping for a stable government for yet another term. With the anticipation of the Modi government securing its third term in the parliament investors across various sectors such as stocks and equities are looking forward to a bullish run in the coming five years.

About S&P Global Inc.

S&P Global Inc., formerly known as McGraw Hill Financial, Inc. until April 2016 and The McGraw–Hill Companies, Inc. until 2013, is a publicly traded American corporation based in Manhattan, New York City. Its main areas of operation include financial information and analytics.

S&P Global Ratings, S&P Global Market Intelligence, S&P Global Mobility, S&P Global Engineering Solutions, S&P Global Sustainable1, and S&P Global Commodity Insights, along with CRISIL, are its subsidiaries, and it holds the majority stake in the S&P Dow Jones Indices joint venture. The abbreviation “S&P” stands for “Standard and Poor’s.”

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Prateek Levi

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Prateek Levi
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