In a big fillip to India’s growth story, international rating agency, Standard & Poor (S&P’s) reversing the stance it took two years ago, lifted India’s rating outlook to 'stable' from 'negative', in a validation of Prime Minister Narendra Modi's ambitious agenda of economic and fiscal reforms. S&P, in April 2012, had cut India's “BBB-minus” rating to 'negative', leaving it on the verge of a 'junk' rating. Thus, with this outlook upgrade, India is now rated at the lowest investment grade with a 'stable' outlook by all three major global credit agencies, in line with fellow BRICS countries Brazil and South Africa.
S&P cited India's external position and its improving current account balance as other positive factors. It acknowledged the country’s progress in narrowing its Current Account Deficit (CAD), with measures such as curbs on gold imports by the previous Congress government, along with Reserve Bank of India Governor Raghuram Rajan's commitment to curb inflation, were factors behind the recovery of foreign investor interest in India.
The international rating agency, in its press note, underscored that its stable outlook reflects its views that the new government had both willingness and capacity to implement reforms necessary to restore some of India's lost growth potential. However, it warned that the rating agency could lower country’s rating should the reform agenda stall over the next 24 months and highlighted that its key constraints for the rating upgrade included India’s low wealth level as well as its weak public finances.