S&P Global has said that India’s rapid economic growth will be enough to offset worries about the independence of its central bank and keep its credit rating in the coveted investment grade bracket. It also said ‘we always like to see a central bank that is independent because if you do not, it can have very negative consequences on your capacity to contain inflation and foster growth’. It added at the moment the high growth is enough to keep the rating stable.
It further mentioned that ‘when you are growing at 7%, that environment is quite forgiving, because it allows for a lot of these unorthodox things to happen without having a tremendous amount of damage’. Still, there are other pressures mounting too. Prime Minister Narendra Modi’s support has taken a hit ahead of national elections next year, volatile crude prices are tough for a country that imports over 90 percent of its oil, and there is general pressure on emerging markets amid a rumbling global trade war.
India’s BBB- rating puts it on the bottom rung of the investment grade ladder, and sentiment towards the country was hit when central bank governor Urjit Patel resigned following a months-long tussle over policy with the government.
