Global rating agency S&P today affirmed India’s sovereign ratings at ‘BBB-/A-3’ with stable outlook, saying that it expects GDP growth to recover towards the longer term trend rates over two-three years. It also said that India is experiencing a cyclical, rather than a structural, economic slowdown.
The ratings on India reflect the country’s above-average real GDP growth, sound external profile, and evolving monetary settings, S&P said adding that India’s strong democratic institutions promote policy stability and compromise, and also underpin the ratings.
The Reserve Bank of India last week projected the economy to expand by 6% during the next financial year, pegging it at the lower end of the GDP growth estimate of the Economic Survey. The survey, tabled in Parliament last month, estimated the GDP growth during FY21 at 6-6.5%. The government has taken a host of steps to spur economic growth, which is estimated to have slow to a 5% in the current fiscal.
Replying to the debate on the Union Budget 2020-21 in Lok Sabha, Finance Minister Nirmala Sitharaman last week said that several important indicators have emerged in the recent past pointing towards green shoots in the economy. They include rising net portfolio investments, rebound in industrial activity, increase in forex reserves and growth in GST collections.
Here is what S&P said:
India’s stable outlook reflects view that its growth will stabilize and begin to recover from its current low ebb.
India’s fiscal deficits will remain broadly in line with our forecasts over the next two years.
S&P expects India’s economy to continue to outperform peers at a similar level of income, despite a recent slowdown in real GDP growth.
India’s ratings reflect the country’s above-average real GDP growth, sound external profile, and evolving monetary settings.
S&P says it believes India is experiencing a cyclical, rather than a structural, economic slowdown.