The global rating agency Standard and Poor's (S&P) after making rating outlook upgrade for India has raised concern over policy logjam and red tape, which have hindered investments in India. In a study, it said investment growth was weakening in the country and earnings growth of companies was flat. There had been a logjam in policy making by the previous government and signs of revival were not apparent.
In its recent study on the economies of India, China and Indonesia, the agency said that despite the recent upward revision to its gross domestic product growth data, India's weak investment (and relatively flat earnings) is clearly apparent in the micro data.
In its study it revealed that earnings growth in companies among the sectors studied had lagged investment and debt almost every year since 2008, which implies that there was a gridlock in policymaking after the global financial crisis that led to dormant assets and stagnant earnings; that is, investment projects were not brought to fruition.
Earlier, while upgrading the outlook of India’s sovereign rating it has said that its outlook revision indicates that it believe the current government's strong mandate will enable it to implement many of its administrative, fiscal and economic reforms. S&P cited India's external position and its improving current account balance as other positive factors. S&P had cut India’s “BBB-minus” rating to “negative” in April 2012, leaving it on the verge of a “junk” rating.
