With S&P Global upgrading the country’s sovereign credit rating, Corporate India is likely to get the twin benefits of lower cost of funds as well as access to a larger pool of capital.
Confidence boost for investors
Industry captains and senior consultants say the upgrade–which comes at a time when Indian goods face 50% US tariff–underscores the strength of the country’s domestic consumption.
“It (the upgrade) will further boost global investor confidence, attract fresh capital and accelerate the nation’s transformation,” Anish Shah, MD & CEO, Mahindra Group, said, adding that the upgrade is a strong vote of confidence for India’s robust economic fundamentals, disciplined fiscal consolidation, and sustained reform momentum.
A senior executive at Waaree Energies said: “It (the upgrade) will certainly reduce cost of funds for companies in the long run and help them access a larger pool of capital.”
Ranen Banerjee, partner and economic advisory leader at PWC India, pointed out that the upgrade will lead to the overall borrowing costs for the government as well as the private sector going down. “There will also be a positive rub on the currency exchange rate. This (upgrade) will bring down the yields as well as aid in more capital flows in the country,” he said.
Lower borrowing costs, stronger fundamentals
“S&P’s upgrade is mainly due to India maintaining a robust growth performance in the post-Covid years, outshining all other major global economies, while maintaining a sustained thrust towards fiscal consolidation after its fiscal deficit had peaked in the Covid year of FY21,” said DK Srivastava, chief policy adviser at EY India.
The upgrade makes India an attractive investment destination, Srivastava said, adding that it will also tangibly reduce international borrowing costs for Indian corporates. “This is in spite of US tariff-related uncertainties as India’s GDP growth rate is not significantly vulnerable to its net exports,” he said.
Niranjan Hiranandani, MD, Hiranandani Group, said the borrowing rates will go down within the country and abroad due to the upgrade and lower inflation. “Since inflation is under control, RBI could reduce rates in the next meeting,” he said.
Rishi Shah, partner and economic advisory services leader, Grant Thornton Bharat, said the upgrade was overdue, given India’s macroeconomic fundamentals and the overall management since the pandemic. “Despite near-term geopolitical uncertainties and trade tensions, this reaffirms our conviction in India’s structural growth story and validates the exceptional policy stewardship by both RBI and fiscal authorities,” Shah said.
Radhika Rao, executive director and senior economist at DBS Bank, said the S&P’s rating upgrade brings the country on a par with Indonesia and Mexico. “A positive impetus on the back of this upgrade will help lower the credit premium on the sovereign’s debt as well as further ease corporates’ offshore borrowing costs,” she said.
“With this year’s Budget focused on aligning deficits with the overall debt levels, we expect cumulative deficit and debt levels to recede in the coming years, aided by healthy growth momentum as well as consolidation,” Rao added.