Revising India’s rating depends on economic growth: S&P

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Chennai: Global rating agency Standard & Poor’s (S&P) has said that it could raise India’s sovereign rating if the economy reverts to real per capita gross domestic product (GDP) growth of 5.5 percent.

The rating agency in its report Asia Pacific Sovereign Rating Trends said: “We could raise the rating if the economy reverts to a real per capita GDP trend growth of 5.5 percent per year and fiscal, external, or inflation metrics improve.”

“Conversely, we may lower the rating if the government’s structural reform agenda stalls such that economic growth does not accelerate, or fiscal and debt ratios fail to improve,” S&P said.

According to S&P, the stable outlook rating for the next 24 months reflects its views that the new BJP-led government has both the willingness and capacity to implement reforms necessary to restore some of India’s lost growth potential.

The agency also said the new government should also have the willingness and capacity to consolidate its fiscal accounts and permit the Reserve Bank of India to carry out effective monetary policy.

The S&P expects that political developments in few Asia-Pacific sovereigns will be an important factor in shaping credit trends in the next few years.

“New leaders in India and Indonesia have made changes that are welcomed by investors after they came into office in 2014,” S&P said.

Further reforms that improve the investment climate and strengthen fiscal health in India and Indonesia could brighten long-term growth prospects.

In both countries, under-investment in infrastructure has resulted in constraints on development.

Diverting funds from subsidies to public investment and reducing barriers faced by businesses could unlock growth potential and strengthen credit support for these sovereigns.

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