Rating agency feels India needs to do more to improve its credit ratings
Standard and Poor's nudges India on reforms
New Delhi: Just days before the Union Budget, rating agency Standard & Poor’s said on Monday that India needs to boost growth, cut its fiscal deficit and fulfil promises of financial and fiscal reforms to justify an upgrade in its credit rating. India is currently placed just one rung above junk bond territory.
In a report, S&P’s analyst said that India’s low income levels and weak fiscal and debt indicators constrain the country’s credit profile. However, it put the onus on the Modi government to change this saying that “the political stability following the general elections last year has created a conducive environment for reforms, which could address these weaknesses.”
India’s sovereign indicators therefore stand a better chance of closing the gap with those of similarly rated sovereigns, it said. “Higher growth in real per capita GDP, stronger fiscal and debt metrics, and an improved external position or monetary policy setting are needed to enhance the sovereign’s creditworthiness,” said S&P’s credit analyst Agost Benard.
“The government’s ability to fulfil its promises on key reforms will therefore be critical,” he added. Later, S&P clarified that “this commentary and its subject matter have not been the subject of Rating Committee action and should not be interpreted as a change to, or affirmation of, a credit rating or rating.”
The report considers Brazil, Colombia, Indonesia, the Philippines, South Africa, and Uruguay as India’s peers. “ The average income in India is significantly below that of its peers and the government is also more heavily indebted,” said the report.
( Source : dc correspondent )
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