Standard & Poor’s keeps India’s credit rating at a low BBB- with a ‘stable’ outlook, praises reforms
A BBB- rating is just a grade above junk status and has remained unchanged for India for a decade.
Financial services company Standard & Poor’s on Friday kept its sovereign rating for India constant at BBB- and its outlook for the country “stable”.
A BBB- rating from Standard & Poor’s is the lowest investment grade for bonds. It is the same as rating agency Moody’s Baa3 grade.
On November 17, Moody’s had upgraded India’s local and foreign currency issuer ratings to Baa2 from Baa3. Such credit ratings estimate a country’s ability to fulfill financial commitments.
A favourable rating helps governments and companies raise capital in global financial markets. Institutional investors rely on these ratings to determine a country’s sociopolitical environment before making investment decisions.
Stable outlook reflects our view that over the next 2 years growth will remain strong, India will maintain its sound external accounts position and fiscal deficits will remain broadly in line with our expectations: S&P Global Ratings
— ANI (@ANI) November 24, 2017
S&P had last changed India’s rating in January 2007, when it upgraded it to BBB- and assigned the “stable” outlook. In 2009, it changed the outlook to “negative” but raised it to “stable” again in 2010. In 2012, S&P’s lowered the outlook again to “negative” but raised it back after the Narendra Modi government took office in 2014, The Economic Times reported.
The BBB- rating, however, has remained unchanged all through.
S&P’s said it kept the rating unchanged because of India’s sizable fiscal deficit and high government debt. However, it said it expects the Indian economy to grow in 2018-2020. The global ratings agency is also confident about the reforms the government has undertaken.
“Demonetisation and the imposition of the Goods and Services Tax led to some quarterly cooling in India’s high growth figures, but the medium-term outlook for growth remains favorable, based on private consumption, an ambitious public infrastructure investment program and a bank restructuring plan,” S&P’s said.
S&P’s BBB- rating, which is just a grade above junk status, comes at a time the government has been insisting that India has been on the path of economic growth and stability since 2014.
