‘No matter the election result…’: S&P changes India outlook from stable to positive

S&P revised India outlook from stable to positive. “We expect solid economic fundamentals to drive growth over the next two to three years. Regardless of the election result, we anticipate continuity of economic reforms and fiscal policy,” the agency said.

S&P said it could upgrade India’s credit rating over the next 2 years if the country adopts prudent fiscal and monetary policies that reduce the government’s elevated debt and interest burden while increasing economic resilience.

“The positive outlook reflects our view that continued policy stability, deepening economic reforms and strong infrastructure investment will sustain long-term growth prospects,” S&P said.

S&P changed its outlook for India from stable to positive. At the same time, it affirmed its long-term unsolicited sovereign credit ratings of BBB and short-term ‘A-3’ in local and foreign currency.

BBB- is the lowest investment rating. The agency last raised the rating outlook to stable from negative in 2010.

The US-based agency said it could upgrade the ratings if India’s fiscal deficit narrows significantly, resulting in general government debt falling below 7 percent of GDP on a structural basis. “A prolonged increase in public investment in infrastructure will boost economic growth momentum, which, combined with fiscal adjustments, could alleviate India’s weak public finances.

“We may also upgrade the ratings if we see sustained and significant improvements in the efficiency and credibility of central bank monetary policy to keep inflation under control at sustained levels over time,” S&P said.

All three major global rating agencies – S&P, Fitch and Moody’s – have given India the lowest investment grade rating. However, Fitch and Moody’s continue to maintain a stable outlook on their ratings. Ratings are treated by investors as a barometer of a country’s creditworthiness and influence the costs of external financing.