Credit ratings agency S&P Global on Thursday upgraded India's long-term unsolicited sovereign credit ratings to "BBB" from "BBB-", citing economic resilience and sustained fiscal consolidation, while maintaining a stable outlook.
The agency said the stable outlook reflects expectations of continued policy stability and high infrastructure investment, which are set to bolster India’s long-term growth. S&P also noted that the impact of U.S. tariffs on India will likely be manageable, with sound economic fundamentals expected to support the country's growth momentum over the next two to three years.
"Robust economic expansion is having a constructive effect on India's credit metrics, and we expect sound economic fundamentals to underpin growth momentum over the next two to three years. In addition, monetary policy settings have become increasingly conducive to managing inflationary expectations."
India remains among the best performing economies in the world, said S&P. "It staged a remarkable comeback from the pandemic with real GDP growth over fiscal 2022 (year-end March 31) to fiscal 2024 averaging 8.8%, the highest in Asia-Pacific. We expect these growth dynamics to continue in the medium term, with GDP increasing 6.8% annually over the next three years. This has a moderating effect on the ratio of government debt to GDP despite still-wide fiscal deficits."
Amid the trade policy negotiations, Trump had called India as a "dead economy" while expressing disappointment with New Delhi's posturing to continue buying cheap oil from Russia.
"I don't care what India does with Russia. They can take their dead economies down together," Trump had reportedly said.
S&P said it expects that in the event India has to switch from importing Russian crude oil, the fiscal cost, if fully borne by the government, will be modest given the narrow price differential between Russian crude and current international benchmarks.
S&P warned that it may lower the ratings if it observes an erosion of political commitment to consolidate public finances. In addition, downward pressure could also come from India's economic growth slowing materially on a structural basis such that it undermines fiscal sustainability, it added.
"We may raise the ratings if fiscal deficits narrow meaningfully such that the net change in general government debt falls below 6% of GDP on a structural basis. The protracted rise in public investment in infrastructure will lift economic growth dynamism that, combined with fiscal adjustments, would alleviate India's weak public finances."
The rating agency said, the upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations. Together with the government's commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics, it said.
Source Name : Economic Times