S&P Global Upgrades India's Sovereign Rating Outlook To 'Positive' From 'Stable', Affirms Credit Ratings
The rating agency affirmed its 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings.
S&P Global revised India's sovereign outlook from 'stable' to 'positive' on Wednesday, citing confidence in the country's policy stability, economic reforms, and infrastructure investments.
The agency maintained its 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings.
"The positive outlook reflects our view that continued policy stability, deepening economic reforms, and high infrastructure investment will sustain long-term growth prospects," S&P Global stated.
This revision coincides with India's national elections, held from April to June 1, involving nearly 100 crore eligible voters selecting representatives for 543 seats in the Lok Sabha, the lower house of Parliament.
S&P Global expects broad continuity in economic reforms and fiscal policies regardless of the election outcome.
The recent upgrade in the Indian economy's rating by S&P Global could pave the way for rating upgrades and would trigger other agencies to follow suit, according to Bank of Baroda's Chief Economist Madan Sabnavis.
"It is a very big positive and a very big step, as they have acknowledged that fundamentally, the Indian economy is doing very well on all scores," Sabnavis told NDTV Profit in a television interview.
ALSO READ
S&P Outlook Upgrade Can Prompt More Hikes For India, Will Encourage FII Participation: Experts
S&P Global expects cautious fiscal and monetary policies to reduce the government's debt and interest burden, thereby strengthening economic resilience, as it could result in a higher rating within the next 24 months.
The agency might upgrade India's ratings if fiscal deficits narrow significantly, leading to a structural decrease in general government debt to below 7% of GDP. Sustained public investment in infrastructure and fiscal adjustments could boost economic growth and improve India's weak public finances, it said.
"We may also raise the ratings if there is a sustained and substantial improvement in the central bank's monetary policy effectiveness and credibility, such that inflation is managed at a durably lower rate over time," S&P Global added.
However, S&P Global warned it could revert the outlook to 'stable' if political commitment to sustainable public finances weakens. A significant widening of current account deficits, making India a net external debtor, could also prompt a revision back to 'stable', it said.
