S&P Retains India’s Rating, Outlook

Close on the heels of Moody’s upgrading India’s sovereign credit rating, another global agency, Standard & Poor’s, Friday kept its rating unchanged at ‘BBB-’ while also keeping the outlook ‘stable’, TV reports said citing sources.

S&P took a favorable view of Prime Minister Narendra Modi administration’s economic reforms undertaken and lauded India’s fiscal consolidation drive, but refrained from upgrading the credit rating from the current ‘BBB-’, the lowest investment grade, FEonline reported.

Notably, S&P had last upgraded India’s rating from junk grade ‘BB+’ to lowest investment grade ‘BBB-’ 10 years ago in 2007. S&P has since retained India’s rating at that level, citing the country’s low GDP per capita and weak public finances.

Last year, the global firm had 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.”

Last year, the credit rating agency had added that an upgrade could emerge if the government reforms markedly improved India’s fiscal performance and pushed down the level of net general government debt below 60% of the GDP. Currently, India’s general government debt amounts to about 68% of the GDP.

Many top voices had said that India’s current fiscal position warrants an upgrade. “The S&P is coming out with its review, we are bracing for both a positive and a negative outcome of their assessment,” a senior finance ministry official told the Indian Express Thursday.

After Moody’s credit rating upgrade, Standard & Poor’s Financial Services declined to comment last week, but maintained that India has a weak fiscal position which needs to be addressed, according to ET Now.

In a recent commentary S&P had appreciated India’s structural reforms such as Goods and Services Tax. “The government’s proposed capital infusions step will help to address the banks’ bloated balance sheets, which are partly constraining the economy,” said S&P Global Ratings credit analyst Amit Pandey.

Earlier, the government had been critical of the rating agency’s methodologies. In May 2017, chief economic advisor, Arvind Subramaniam,  had said, “The ratings agencies have been inconsistent in their treatment of China and India. Given this record—what we call Poor Standards—my question is: why do we take these rating analysts seriously at all?”