Taking note of the robust growth and rising quality of government spending, S&P Global Ratings on Wednesday revised India\u2019s outlook to \u2018Positive\u2019 from \u2018Stable\u2019. However, it retained the sovereign rating as \u2018BBB Minus\u2019. <\/p>\n
This means, while the investment grading rating remains the same, there is possibility of upgrade in the next two years.<\/p>\n
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\u201cThe positive outlook reflects our view that continued policy stability, deepening economic reforms, and high infrastructure investment will sustain long-term growth prospects. That, along with cautious fiscal and monetary policy that diminishes the government\u2019s elevated debt and interest burden while bolstering economic resilience, could lead to a higher rating over the next 24 months,\u201d S&P Global Ratings said in a statement.<\/p>\n
Talking about the possibility of an upgrade, the agency said that it might raise the ratings if India\u2018s fiscal deficits narrow meaningfully such that the net change in general government debt falls below 7 per cent of the GDP on a structural basis. The protracted rise in public investment in infrastructure will lift economic growth dynamism that, combined with fiscal adjustments, could alleviate India\u2018s weak public finances. \u201cWe may also raise the ratings if we observe a sustained and substantial improvement in the central bank\u2019s monetary policy effectiveness and credibility, such that inflation is managed at a durably lower rate over time,\u201d it said.<\/p>\n
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However, it could revise the outlook to stable if the agency observes an erosion of political commitment to maintain sustainable public finances, which in turn signifies weakening of the country\u2019s institutional capacity. \u201cIf current account deficits widen materially to weaken India\u2018s external position such that the country becomes a narrow net external debtor, we could also revise the outlook to stable,\u201d the agency said.<\/p>\n
Talking about the overall situation, the agency said that India\u2018s robust economic expansion is having a constructive impact on its credit metrics. It expects sound economic fundamentals to underpin the growth momentum over the next two to three years. \u201cRegardless of the election outcome, we expect broad continuity in economic reforms and fiscal policies,\u201d the agency said.<\/p>\n
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