S&P Upgrades India’s Outlook To Positive From Stable; Affirms Ratings

S&P Upgrades India’s Outlook To Positive From Stable; Affirms Ratings

S&P expects broad continuity in economic reforms and fiscal policies regardless of the general election outcome on 4 June

S&P Global Ratings upgraded India’s outlook to Positive from Stable on robust growth and rising quality of government spending and affirmed its ratings.

“The Positive outlook reflects our view that continued policy stability, deepening economic reforms, and high infrastructure investment will sustain long-term growth prospects,” S&P said in a statement.

That, along with cautious fiscal and monetary policy that diminishes the government's elevated debt and interest burden while bolstering economic resilience, could lead to a higher rating over the next 24 months, it added.

S&P affirmed India’s BBB- long-term and A-3 short-term unsolicited foreign and local currency sovereign credit ratings.

RATIONALE

The rating agency said its Positive outlook on India is predicated on its robust economic growth, pronounced improvement in the quality of government spending, and political commitment to fiscal consolidation.

“We believe these factors are coalescing to benefit credit metrics,” it added.

Following are the key highlights from S&P’s outlook revision on India:

  • India's robust economic expansion is having a constructive impact on its credit metrics. The sound economic fundamentals are likely to underpin the growth momentum over the next two to three years.

  • The composition of government spending has been transformed, with an increasing share going to infrastructure. This will ease bottlenecks to put the country on a higher growth trajectory

  • Elevated fiscal deficits, a large debt stock and interest burden persist, but the government is prioritizing ongoing consolidation efforts.

ELECTION OUTCOME IMPACT

S&P also said it expects broad continuity in economic reforms and fiscal policies regardless of the general election outcome, which is slated to be announced on 4 June.

“Irrespective of the June 2024 general election results, we expect the incoming government to carry on economic reforms to support the growth vigor, continued infrastructure investment drive, and commitment to fiscal consolidation,” it said.

S&P said the solid consumer and public investment dynamics will likely propel real gross domestic product (GDP) growth to 6.8% in FY25, 6.9% in FY26, and 7% in FY27.

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