S&P India credit rating unchanged at BBB-, outlook ‘stable’

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Updated: November 25, 2017 12:06 PM

Close on the heels of Moody's upgrading India's sovereign credit rating, another global agency Standard & Poor's kept its rating unchanged at 'BBB-' while also keeping the outlook 'stable.

S&P retained India’s rating and outlook. (Image: Reuters)

Close on the heels of Moody’s upgrading India’s sovereign credit rating, another global agency Standard & Poor’s kept its rating unchanged at ‘BBB-‘ while also keeping the outlook ‘stable.’  S&P took a favourable view of Narendra Modi administration’s economic reforms undertaken and lauded India’s fiscal consolidation drive, but refrained from upgrading the credit rating from the current ‘BBB-‘, the lowest investment grade. Notably, S&P had last upgraded India’s rating from junk grade “BB+” to lowest investment grade “BBB-” 10 years ago in 2007. S&P has since retained India’s rating at that level, citing the country’s low GDP per capita and weak public finances. Last year, the global firm had said, “The outlook indicates that we do not expect to change our rating on India this year or next, based on our current set of forecasts.”

Last year, the credit rating agency had added that an upgrade could emerge if the government reforms markedly improved India’s fiscal performance and pushed down the level of net general government debt below 60% of the GDP. Currently, India’s general government debt amounts to about 68% of the GDP.

Many top voices had said that India’s current fiscal position warrants an upgrade. “The S&P is coming out with its review, we are bracing for both a positive and a negative outcome of their assessment,” a senior finance ministry official told the Indian Express yesterday. After Moody’s credit rating upgrade, Standard & Poor’s Financial Services declined to comment last week, but maintained that India has a weak fiscal position which needs to be addressed.

In a recent commentary S&P had appreciated India’s structural reforms such as GST. “The government’s proposed capital infusions step will help to address the banks’ bloated balance sheets, which are partly constraining the economy,” said S&P Global Ratings credit analyst Amit Pandey.

Earlier, the government had been critical of the rating agency’s methodologies. In May 2017, Chief Economic Advisor Arvind Subramanian had said, “The ratings agencies have been inconsistent in their treatment of China and India. Given this record — what we call Poor Standards — my question is: why do we take these rating analysts seriously at all?”

(First published on 24-11-2017 on www.financialexpress.com)

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