India's sovereign credit rating should be two notches above what it currently is, given the strong economic performance of the country and government debt that is largely issued in local currency, according to economist Sanjeev Sanyal.
"By any objective criteria, India should actually be rated one, if not two, notches above where it is right now," Sanyal, a member of the Economic Advisory Council of the Prime Minister, told NDTV Profit. "In a sense, they are behind the curve. India is much better positioned than what S&P is making out to be."
The economist welcomed S&P Global's rating outlook upgrade for India on Wednesday, saying that rating agencies are noticing the country's strong and robust macroeconomic indicators.
S&P revised the outlook to 'Positive' from 'Stable', citing confidence in the country's policy stability, economic reforms and infrastructure investments. The ratings agency maintained its 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings.
Also Read: S&P Outlook Upgrade Can Prompt More Hikes For India, Will Encourage FII Participation: Experts
"India is a net-creditor country. We have about $630 billion of external debt and we have around $650 billion of foreign exchange reserves. In that context, what are the chances of default? Very, very low," Sanyal said.
Rating agencies make a "fuss" about the fiscal deficit, even though almost all of the government debt is rupee-denominated, he said. "They make the argument that the US is adding $1 trillion in debt every 100 days, but it is all in dollars. Our debt is also in rupees, so what is the point they are making?"
Sanyal also highlighted the higher GDP growth rate as compared with peers in the 'BBB-' category and the country's healthy banking system.
In April, Moody's affirmed India's outlook at 'Baa3' and 'P-3', signalling stability. However, it issued a warning that escalating political tensions or further weakening of checks and balances could harm the country's long-term growth trajectory.
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