Days ahead of the Budget, rating agency S&P today said India must deliver on reform promises and boost growth as a weak fiscal position is constraining its sovereign rating, which is as such just a notch above the junk level.
“India’s low income levels and weak fiscal and debt indicators constrain the country’s credit profile,” Standard and Poor’s said in a research note on the country’s rating.
The agency said last year’s election results created a conducive environment for reforms with political stability, but termed the “governance effectiveness” as a “neutral credit factor“.
It had upgraded India’s credit rating outlook from ’negative’ to ‘stable’ in September on hopes of reforms. Prior to that, it had voiced concerns about lack of growth, a sense of “policy paralysis” and the high fiscal deficit, and had even threatened to downgrade the rating to ‘junk’
S&P today listed key steps that are required for an upgrade from the current sovereign debt credit rating of ’BBB—minus’ —— the lowest investment grade rating.
“Crucial factors include higher growth in real per capita GDP, stronger fiscal and debt metrics, and a stronger external position or improved monetary policy setting, and the government’s ability to fulfil its promises on key reforms will be critical to the country’s success,” it added.
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