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S&P affirms India’s rating at ‘BBB-’, outlook stable

11 Jun 2020 Evaluate

Global rating agency -- S&P Global Ratings has affirmed 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings on India, dispelling fears that a rating downgrade is on the cards. The agency said the outlook on the long-term rating is stable. It reflects India’s above-average real GDP growth, sound external profile, and evolving monetary settings.

The stable outlook assumes that the government's fiscal deficit will recede markedly following a multi-year high in fiscal year 2021. The agency said it sees a strong recovery from India after a deep contraction in FY21, with the GDP growth at 8.5 percent in FY22. It has forecasted India's economy to shrink by 5 percent this fiscal.

However, it does note that a weak financial sector and rigid labour markets, if not addressed, could hamper the country's recovery. It mentioned while risks to India's long-term growth rate are rising, ongoing economic reforms, if executed well, should keep the country's growth rate ahead of peers.

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