India’s investment grade rating confirmed by S&P

Posted on November 2, 2016

India’s investment grade borrower status has been confirmed by S&P Global Ratings, which praised improvements in economic policymaking under the government of prime minister Narendra Modi.

S&P affirmed the long-term BBB- status for Asia’s second largest economy – its lowest investment grade borrower rank – but warned high levels of government debt, a widening deficit and weak per capita income still “detract from the sovereign’s credit profile”.

Despite the surprise decision by the country’s former central bank governor Raghuram Rajan to leave his post following criticism from some parts of the BJP government, S&P praised India’s “improved monetary credibility”. It said it expects inflation to fall within the central bank’s 5 per cent target by early next year.

The agency also highlighted a much-awaited national goods and services tax, energy sector reforms, and strong institutions in the world’s largest democracy, as supporting its investment grade rating.

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

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