Indian Economy News

S&P upgrades India's outlook to 'positive,' affirms 'BBB-' long-term rating

S&P Global Ratings revised its outlook on India from stable to positive while affirming its lowest investment-grade rating. This revision aligns with expectations of sustained economic reforms and fiscal policy continuity, irrespective of election outcomes. S&P has confirmed India’s long-term sovereign rating at BBB- and short-term at A-3. "India's robust economic expansion positively impacts its credit metrics. We anticipate sound economic fundamentals to support growth momentum over the next 2-3 years," S&P's report stated. However, the rating agency could revert the outlook to stable if there is a decline in political commitment to maintaining sustainable public finances, which would indicate a weakening of the country's institutional capacity.

"The positive outlook reflects our view that continued policy stability, deepening economic reforms, and significant infrastructure investment will sustain long-term growth prospects," S&P Global Ratings commented. It added that cautious fiscal and monetary policies, which reduce the government's elevated debt and interest burden while enhancing economic resilience, could result in a higher rating over the next 24 months. S&P may upgrade India’s ratings if there is a sustained and substantial improvement in the central bank's monetary policy effectiveness and credibility, ensuring inflation is managed at a consistently lower rate over time. The agency has estimated that India’s real GDP growth averaged 8.1% annually over the past 3 years and is projected to expand close to 7.0% annually over the next 3 years. "We forecast India's real GDP growth at 6.8% this year, which compares favourably with emerging market peers amidst a broad global slowdown," S&P Global Ratings stated. While acknowledging that India’s weak fiscal settings have historically been the most vulnerable aspect of its sovereign ratings profile, S&P noted that with economic recovery, the government could again present a more concrete, albeit gradual, path to fiscal consolidation.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.