The global rating agency Standard & Poor's (S&P) has asserted that the direction and pace of policy reforms by the new government formed after the general elections will determine credit rating of India. Presently, Standard & Poor's (S&P) has assigned investment grade 'BBB-' with negative outlook. Voting for General elections in India are scheduled to take place during the period April 7 to May 12 and counting will be taken up on May 16.
Standard & Poor's (S&P) highlighted that the outcome of India's general elections can provide an insight into the political stability, ability, and willingness of the new government to implement reforms for boosting economic growth. Highly fragmented government will not be beneficial for credit attributes of the country, as more parties involved in the next coalition government would bring out more incoherent policies. Further, S&P added that a fragile government could further delay critical reforms as decision-making may get hampered, curbing revival in the investment cycle and derailing growth. The current political landscape in India suggests that no single party could win an outright majority, the rating agency added.
Expressing need for structural reforms to boost economic growth, the global rating agency emphasized that structural reforms are essential for India to return to healthier economic growth of above 6 percent on a sustainable basis. A decisive mandate can create an environment for speedy resolution of policy bottlenecks and reforms, and improve private sector investments which can lay the foundation for India's return to a stronger and healthier growth phase in the medium term. Presently, Indian economy is struggling with slowdown and its growth slowed down to a decade low at 4.5 percent in FY13 and 4.6 percent during the first three quarter of FY14