International rating agency Standard & Poor’s has affirmed its ‘BBB-/A-3’ credit ratings for India. The outlook for country remains stable, the agency said on Wednesday.”External position remains a credit strength,” it said. “Eye India’s current account deficit at 1.4% in 2016 vs 2.1 in 2015 and expect India’s GDP growth at 7.9% in 2016,” it further added. It also said that it doesn’t expect to change its rating on India this year or even the next year. The rating agency also said that downward pressure on ratings would reemerge if MPC is not effective in meeting targets.
Meanwhile, calling the reform process slow and gradual with muted private investment and NPAs posing a challenge, Moody’s recently said it could upgrade India’s rating in 1-2 years if it is convinced that reforms are “tangible”. Moody’s, which has a ‘Baa3’ rating with a positive outlook, said evidence of policymakers working towards a faster fiscal consolidation, reducing the debt-GDP ratio and addressing infrastructure and monsoon volatility challenges will determine an upgrade, going forward. “We have a positive outlook on India. On balance, the risk is on the upside. We are continuously monitoring the rating. We see pressure building up in 1-2 years and any tangible change could bring about a change in rating,” Moody’s Sovereign Group Senior V-P Marie Diron said.
Moody’s listed six agenda on the list of pending reforms — land acquisition Bill, labour law reforms, significant infrastructure investment, tangible benefit from Make in India initiative, tax administration and PSU bank reforms. Stressing that weak financial health of PSU banks continues to pose contingent liability risk and muted private sector investment constrains India’s ratings, Diron said external sector vulnerability and geo-political risks could pose additional pressure.