The government’s reform agenda failed to pass muster yet again as international ratings agency Standard and Poor’s (S&P) has retained India’s rating at ‘BBB-/A-3’ with a Stable outlook and ruled out a review even next year.

This is the lowest investment grade rating and the government has been pitching for an upgrade after reforms such as the Insolvency Code and Constitution Amendment Act for the Goods and Services Tax.

“There is disconnect between investors’ thinking and rating agencies,” said Economic Affairs Secretary Shaktikanta Das. “The government will continue to undertake measures necessary to strengthen economy, boost GDP growth and create jobs.”

The ratings agency, in a statement, said: “The outlook indicates that we do not expect to change our rating on India this year or next, based on our current set of forecasts.” A rating upgrade may be possible if the government’s reforms improves the fiscal situation and the net general government debt falls below 60 per cent of the GDP, it added. At present, it is about 69 per cent of the GDP.

In September, Moody’s Ratings had said a review of India’s ratings may be possible only after one to two years.

GDP growth at 7.9% S&P was more optimistic about the economy and pegged the GDP growth rate at 7.9 per cent in 2016 and an average of eight per cent over 2016-18.

“The ratings on India reflect the country’s sound external profile and improved monetary credibility,” it said.

It also congratulated the government in building consensus for the passage of many laws such as the GST Constitution Amendment Act.

“We believe these measures, supported by India’s well-entrenched democracy, will promote greater economic flexibility and help redress public finances over time,” it said.

However, the ratings agency added that these strengths had to be balanced against vulnerabilities stemming from the country’s low per capita income, weak public finances and challenges in the banking sector.

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