Indians’ low incomes, high government debt and supply constraints are the key barriers to an improvement in the country’s sovereign rating, said Standard & Poor’s in a release on Monday.
S&P retained its lowest investment grade BBB- rating with a ‘stable’ outlook on India and said it was unlikely to change the rating until at least next year.
“The stable outlook balances India’s sound external position and inclusive policymaking traditions against the vulnerabilities stemming from its low per capita income and weak public finances,” Standard & Poor’s said.
“The outlook indicates that we do not expect to change our rating on India this year or next based on our current set of forecasts.”
Besides S&P, Fitch also has a ‘stable’ outlook on India while Moody’s raised it to ‘positive’ in April.
India’s ratings could improve if the government undertook reforms which would improve the fiscal deficit and bring down net government debt to below 60 per cent of gross domestic product, S&P said.
However, the ratings could come under downward pressure if growth disappoints or the Reserve Bank of India’s proposed new monetary policy committee fails to achieve its targets.
Indian economic growth slowed to 7 per cent in the April-June quarter, casting doubt on the ability of Narendra Modi’s government to achieve its estimate of 8.0-8.5 per cent expansion for the fiscal year ending in March.
S&P expects India to grow at 7.4 per cent in 2015, similar to the central bank’s forecast for the fiscal year ending in March.
[“source -financialexpress”]
