The ratings of Spain, Italy, and Ireland are two notches higher than the sovereign rating of India. Although bond spreads for the three European sovereigns have widened, they still possess an income and economic structure more developed than Indias, with greater financial market development, S&P director of Sovereign and International Public Finance Ratings Takahira Ogawa told FE in an emailed response.
The finance ministry has maintained that India deserves better ratings than many Eurozone countries, which are hit by recession, high unemployment rate, ageing population, high debt to GDP ratios and weaker fiscal situation.
S&P recently affirmed Indias long-term sovereign credit rating at BBB-, the lowest investment grade. However, the outlook was revised to negative from stable due to persistent external risks to the economy, high fiscal deficit, heavy debt and a weakened political setting that could slow reforms.
It warned of a one-in-three chance of a rating downgrade in the next couple of years. S&P cited persistent external risks to the economy, high fiscal deficit, heavy debt and a weakened political setting that could slow reforms for the move.
In comparison, S&P has given BBB+ rating to Spain, Ireland and Italy. Spains economy is facing troubled times as it has plunged back into recession in the first quarter of 2012. Besides, the debt burden of Italy is likely to be around 125% of its GDP this year while the government has recently forecast 1.2% contraction in GDP in 2012. The deficit of Irish economy is likely to be 8.2% of GDP this year.
On the other hand, India's fiscal deficit is pegged at 5.1% of GDP in 2012-13, down from 5.9% in 2011-12. S&P expects Indias debt-to-GDP ratio to be around 71% in 2012-13, with interest payments being 25% of government revenues. Moodys has a Baa3 rating on India, while Fitch rates India BBB-. Both are also the minimum investment grade ratings.
Moodys in December issued a stable outlook for India. Last month, Moody's Analytics said India was growing but below its potential as politics is weighing on the economy and termed the national government as the single biggest drag on business activity.