S&P Global Ratings recently affirmed India’s sovereign rating at the lowest investment grade of ‘BBB minus’ for the 14th year in a row with a stable outlook, saying the country’s strong external settings will act as a buffer against financial strains despite elevated government funding needs over the next 24 months.
Economic activity in India will start normalising throughout the remainder of fiscal 2021-22, resulting in real gross domestic product (GDP) growth of about 9.5 per cent, it forecast.S&P Global Ratings has affirmed India's sovereign rating at the lowest investment grade of 'BBB minus' for the 14th year in a row with a stable outlook, saying strong external settings will be a buffer against financial strains despite elevated government funding needs over two years. Economic activity will start normalising in the remainder of this fiscal.#
The sovereign credit ratings on India reflect the economy’s above-average long-term real GDP growth, sound external profile, and evolving monetary settings, S&P Global Ratings stated.
“India’s democratic institutions promote policy stability and compromise, and also underpin the ratings. These strengths are balanced against vulnerabilities stemming from the country’s low per capita income and weak fiscal settings, including consistently elevated general government deficits and indebtedness,” it said in a statement.
A significant proportion of this rebound will be due to the very weak base in the prior fiscal year, when the economy contracted by a record 7.3 per cent.
India’s fiscal settings are weak, and deficits will remain elevated over the coming years even as the government undertakes some consolidation.
The country’s strong external settings help buffer the risks associated with the government’s high deficits and debt stock, S&P said while affirming ‘BBB minus’ long-term and ‘A-3’ short-term unsolicited foreign and local currency sovereign ratings on India.
“The stable outlook reflects our expectation that India’s economy will recover following the resolution of the COVID-19 pandemic, and that the country’s strong external settings will act as a buffer against financial strains despite elevated government funding needs over the next 24 months,” it added.
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