New Delhi: S&P Global Ratings Tuesday said India stands out both on growth and external fronts amongst the South Asian countries, and the trajectory of government’s fiscal deficit will decide on the direction of sovereign ratings.
S&P Director, Sovereign and International Public Finance Ratings (Asia-Pacific), Andrew Wood said the rating agency sees a lot of promise in India’s economic growth story even though the global economic growth outlook remains somewhat challenging.
“We could raise the rating if India’s fiscal deficit narrows meaningfully such that change in net general government deficit falls below 7 per cent of GDP on a structural basis,” Wood said at a webinar on Asia-Pacific.
He said in the geography of South Asia, India stands out both on growth and external fronts.
“India is a net external creditor economy which is a core support for its investment grade rating. We see a lot of promise in India’s economic growth story even in a somewhat challenging global economic growth outlook,” Wood added.
The Budget for 2024-25 has announced targeting a central government fiscal deficit of 4.9 per cent of GDP in the current fiscal, lower than 5.1 per cent targeted earlier.
“This is good news at the margin but combined with local government deficit, general government deficit is likely to remain above 7 per cent of GDP at least for current fiscal. So the trajectory for this metrics over the next few years will remain an important one for the directionality of India’s ratings,” Wood said.
In May, S&P Global Ratings had upped India’s sovereign rating outlook to positive from stable on robust growth prospects for next three years and public spending, and raised hopes for an upgrade in two years provided the government continues reforms and policies to keep fiscal deficit under check.
While retaining India’s sovereign rating at the lowest investment grade of ‘BBB-‘, S&P said it expects broad continuity in economic reforms and fiscal policies, irrespective of the election outcome.
PTI
