World Economy

S&P Raises India’s Credit Outlook

S&P Raises India’s Credit OutlookS&P Raises India’s Credit Outlook

Ratings agency Standard & Poor’s has acknowledged India’s recent reform drive by raising the country’s credit outlook. But Prime Minister Narendra Modi will still have to make big-ticket moves to convince analysts.

S&P upped India’s credit outlook from “negative” to “stable”, arguing that the prospects for more economic reforms had grown considerably under Prime Minister Narendra Modi’s new right-wing government, DW reported.

“The stable outlook reflects our expectations that the newly elected government will be able to implement reforms that spur growth, which in turn improves fiscal performance,” the ratings agency said in a statement.

S&P kept its main sovereign credit rating for the Asian country unchanged at “BBB-,” though, waiting for big-ticket economic measures needed to fire up growth.

S&P’s announcement came a day after the Asian Development Bank also expressed hope of a turnaround in India’s economy under Modi.

Investors felt encouraged by the ratings agency’s credit outlook statement, with India’s benchmark index rising by 0.6 percent and the broader NSE index gaining 2 percent on Friday.

 Strong Mandate

Spurred in part by a new government with a strong mandate and a wide-ranging reform agenda, the Indian economy is set to benefit from a revival of investment and improved growth in advanced economies, ADB said in its report.

In an update of its flagship annual economic publication, Asian Development Outlook 2014, ADB raised its forecast for growth of Indian gross domestic product (GDP) in the fiscal year ending 31 March 2016 (FY2015) to 6.3% from 6.0% anticipated in April. ADB maintained its forecast of 5.5% growth in FY2014.

“By advancing its structural reform plans and proceeding with large infrastructure projects, the government can spur private sector investment that will build strong growth momentum for the next few years,” said ADB Chief Economist Shang-Jin Wei in launching the new report. “Given its labor cost advantage and vast overseas diaspora networks, by putting the right policy package in place India could replicate or even exceed its best growth performance of the past.”

In the first quarter of FY2014, economic activity picked up to 5.7%—the highest pace in nine quarters. Growth was supported by an upturn in domestic demand led by investment—with fixed investment soaring by 7%—and by government spending.