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S&P predicts a stable outlook for India’s credit rating

S&P Global Ratings on Wednesday maintained India’s lowest investment grade (BBB-) credit rating with a fairly stable outlook. This is owing to the fact that it expects the country’s economy and fiscal position to stabilize and show early signs of recovery from 2021 onwards.

“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. The economic hit from covid-19 will exacerbate India’s weak fiscal settings. We expect a materially larger fiscal deficit this year, followed by consolidation over the next three years,” S&P said.

At a time when Moody’s Investors Service downgraded India’s sovereign rating recently, this comes as a huge relief to the government. However,  Fitch Ratings on Wednesday cautioned that lack of a credible medium-term strategy for stabilizing the mounting public debt in India in wake of the coronavirus crisis subsides could put downward pressure on the sovereign rating. S&P reverberated the same sentiment when it stated that downward pressure on India’s sovereign rating could emerge over the next 1-2 years if India’s GDP growth fails to meaningfully recover from 2021