S&P Global Ratings has affirmed India’s ‘BBB’ sovereign credit rating with a stable outlook, underscoring the nation’s dynamic and fast-growing economy, robust external balance sheet, and predictable policy environment.
Photograph: Rupak De Chowdhuri/Reuters
Key Points
- S&P Global Ratings has affirmed India’s ‘BBB’ sovereign credit rating with a stable outlook, highlighting its dynamic and fast-growing economy.
- The rating is supported by India’s strong external balance sheet and stable institutions that ensure policy predictability.
- Despite high energy prices and challenging agricultural conditions, S&P expects India’s economic fundamentals to remain sound, supporting robust growth of 7% annually over the next three years.
- Counterbalancing these strengths are the government’s weak fiscal performance, burdensome debt stock, and low GDP per capita.
- Another rating agency, Fitch, also recently affirmed India’s rating at ‘BBB-‘, citing a robust domestic economy.
S&P Global Ratings on Thursday retained India’s sovereign rating at ‘BBB’ with a stable outlook, saying India is a dynamic and fast-growing economy with policy predictability.
S&P said high energy prices and challenging agricultural conditions will marginally slow India’s growth this year, but economic fundamentals are expected to remain sound and support robust growth over the next two to three years.
Factors Supporting India’s Rating
“The sovereign credit ratings on India are anchored by a dynamic and fast-growing economy, strong external balance sheet, and stable institutions that support policy predictability,” S&P said while affirming its ‘BBB’ long-term and ‘A-2’ short-term unsolicited sovereign credit ratings on India.
The outlook on the long-term rating is stable.
The ‘BBB’ is the investment-grade rating.
Counterbalancing the strengths are the government’s weak fiscal performance and burdensome debt stock, as well as low GDP per capita, the US-based agency said.
Growth Outlook and Fiscal Stability
The stable outlook reflects S&P’s view that continued policy stability and high infrastructure investment will support India’s long-term growth prospects.
The growth outlook, along with stable fiscal and monetary policies that moderate the government’s elevated debt and interest burden, will underpin the rating over the next 24 months, it added.
India remains among the best-performing economies in the world, with an average annual growth of 7.9 per cent in the last five years, from fiscal 2022 (year-ended March 31, 2022) to fiscal 2026.
“We forecast growth to fall to 6.6 per cent this fiscal year on account of an ongoing energy shock and challenging agricultural conditions.
“But we expect India’s strong growth dynamics to continue in the medium term with GDP growth averaging 7 per cent annually over the next three years.
“This has a moderating effect on the ratio of government debt to GDP despite wide fiscal deficits,” S&P added.
Earlier Development
Earlier this month, another rating agency, Fitch, too, had affirmed India’s rating at ‘BBB-‘, citing a robust domestic economy.
