The Hindu Business Line : S&P’s long term outlook on India remains stable

Mumbai, April 30 Standard & Poor’s Ratings Services affirmed its ‘BBB- long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook on the long-term rating remains stable.

This reflects the country’s strong economic prospects, external balance sheet and its deep capital market, which supports a weak, but improving, fiscal position, said a press release from S&P.

The factors aiding India’s strong economic prospects include the dynamic service sector, gradual deregulation of the industrial sector, continued trade liberalisation and modest improvements in infrastructure. Higher consumption and private investment demand, due to a growing middle class and favourable demographics, are also helping economic growth, said S&P.

Improvements such as strong revenue collection and expenditure controls are somewhat overstated, given that increase in subsidies for oil, food and fertilisers, estimated to be about 1 per cent of GDP, are not accounted for in the Central Government deficit.

The release quoted Standard & Poor’s credit analyst, Mr Takahira Ogawa, as saying, “The ratings on India remain constrained by a weak fiscal profile, especially its high Government debt burden and deficit, which are still among the largest for rated sovereigns.”

About the stable outlook, S&P said it balances India’s strong external liquidity and growth prospects with its weak fiscal flexibility.

Further rating improvements will depend on sustained prudent fiscal policy that leads to further declines in the Government debt and interest burdens, and additional reforms that lift the country’s growth prospects and income levels.

By contrast, policies that reverse fiscal consolidation, weaken economic growth prospects, and erode the Government’s strong external liquidity position could lead to downward pressures on the rating, S&P said

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