S&P’s retains India’s sovereign rating at BBB- with stable outlook

Expressing confidence in India’s ability to bounce back after the Covid crisis abates, Standard & Poor retained India’s sovereign credit rating at BBB- with stable outlook.

The ratings agency said, “While risks to India’s long-term growth rate are rising, ongoing economic reforms, if executed well, should keep the country’s growth rate ahead of peers.”

This comes after Moody’s downgraded India’s sovereign rating last week citing the country’s policy making institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector

S&P has forecast India’s economy to shrink by 5 per cent this fiscal.

Here’s what led S&P to retain the ratings:

The Good: India’s above average real GDP growth, sound external profile,strong democratic institutions that promote policy stability and some of the factors that led to S&P retaining the sovereign rating at BBB- with a stable outlook. It also expressed hope in the ongoing reforms process which it said could help India stay ahead of peers if executed well.

The Bad: The risk to fiscal slippages at a time of higher government borrowings and low per capita income adding to the general government debt are some of the factors that pose a risk to longer stability.

However, the ratings major placed its faith in a significant recovery in India’s fiscal position after the current fiscal.

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