Stable outlook for long-term
India’s economic growth will be strong and maintain sound net external position, said S&P Global Ratings on 13 Feb 2020, giving stable outlook for long-term rating.
S&P affirmed its ‘BBB-‘ long-term and ‘A-3’ short-term unsolicited foreign and local currency sovereign credit ratings on India.
“The outlook on the long-term rating is stable,” the rating agency underlined.
“The stable outlook reflects our expectation that India’s growth will be strong, the country will maintain its sound net external position, and its fiscal deficits will remain elevated but broadly in line with our forecasts over the next two years,” said S&P.
Upward pressure on the ratings could build if the government significantly curtails its fiscal deficits, resulting in lower net indebtedness at the general government level.
Upside potential on the ratings could also increase if India’s external accounts strengthen substantially.
“Downward pressure on the ratings could emerge if: (1) India’s GDP growth falls well below our forecasts, causing us to reassess our view of trend growth; (2) net general government deficits rise further from their currently elevated levels; or (3) political developments materially undermine economic reform momentum,” said the rating agency.
The ratings on India reflect the country’s above-average real GDP growth, sound external profile, and evolving monetary settings.
India’s strong 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 consistently elevated fiscal deficits that contribute to high general government debt, net of liquid assets, S&P noted.
“We expect India’s economy to continue to outperform peers at a similar level of income, despite a recent slowdown in real GDP growth,” it said.
Supportive monetary, fiscal, and cyclical factors should support economic recovery, with real GDP growth averaging 7.1% in fiscals 2020-2024.
In S&P view, the Indian economy has slowed measurably. Real GDP growth fell to a more than six-year low of 4.5% year-on-year in the second quarter of this fiscal year (ending March 31, 2020). This is the fifth consecutive quarter of decline in year-on-year growth rate. Fiinews.com
