New Delhi: Saluting the economic management of the Modi government, S&P Global Ratings has upgraded India's sovereign rating outlook to stable due to strong growth after a gap of 14 years, improvement in the quality of public spending over the last 5 years and expectations of broad sustainability. Has been upgraded to positive. Reforms in fiscal policies.
However, S&P has maintained India's sovereign rating at the lowest investment grade 'BBB-'.
In a statement on Wednesday, the US-based agency said India's ratings could be upgraded over the next 24 months if the country adopts a cautious fiscal monetary policy that moderates increased government debt and interest while strengthening economic resilience. Reduces the burden. S&P's rating comment comes within a week of a record dividend transfer of Rs 2.10 lakh crore to the government by the RBI.This amount can be used to reduce the fiscal deficit of the Centre.
"India's outlook was revised to positive on strong growth and the rising quality of government spending; BBB- long-term and 'A-3' short-term unsecured foreign and local currency sovereign credit ratings were affirmed," S&P said.
Sovereign rating is a tool to measure the risk level of a country's investment environment and shows investors a country's ability to repay its debt. In 2010, S&P raised the outlook to stable from negative. The rating is viewed by investors as a barometer of a country's creditworthiness and has an impact on borrowing costs."Our positive outlook on India is based on its strong economic growth, improving quality of government spending and political commitment to fiscal consolidation. We believe these factors are converging to benefit credit metrics," S&P said.
It said the structure of government expenditure has been changed, with the share of infrastructure increasing. This will reduce the obstacles to taking the country on a higher growth path. S&P said that India's strong economic expansion is having a constructive impact on its credit metrics.S&P said, "We expect strong economic fundamentals to underpin growth momentum over the next two to three years. Regardless of the election outcome, we expect continuity in economic reforms and fiscal policies."
The positive outlook reflects S&P's view that continued policy stability, deepening economic reforms and high infrastructure investment will sustain long-term growth prospects. "Along with cautious fiscal and monetary policy that strengthens the economy's resilience," S&P said. "Huey reduces the government's increased debt and interest burden, could achieve higher rating in next 24 months."
S&P said the Indian economy has made a "remarkable comeback" from the COVID-19 pandemic, with India's real GDP growth forecast at 6.8 per cent this year, which would compare favorably with emerging market peers amid a global recession. Is.The agency estimates that real GDP growth over the past three years will average 8.1 percent annually, the highest in the Asia-Pacific region. It expects these growth dynamics to continue in the medium term and that GDP growth over the next three years will average 8.1 percent. Domestic product will grow by about 7 percent, which will have a moderate impact on the government debt to GDP ratio despite the fiscal deficit.
S&P said the quality of government spending has improved over the past four to five years and public investment and consumer momentum will strengthen standalone growth prospects over the next three to four years.
The Modi administration has increasingly shifted budget allocations to infrastructure spending. Capital expenditure is estimated to increase to Rs 1 lakh crore in FY2025, or about 3.4 percent of GDP.That's up from about 4.5 a decade ago. S&P believes improvements in infrastructure and connectivity in India will remove chokepoints that are hindering long-term economic growth.
India's weak fiscal setting has always been the weakest part of the sovereign rating profile. All three major global rating agencies – S&P, FITC and Moody's – have given India the lowest investment grade rating.
S&P said the economic recovery is now on good track, with the government again able to show a more concrete (albeit gradual) path to fiscal consolidation.S&P estimates the general government (Centre + State) deficit to be 7.9 per cent of GD in FY2025, which will gradually decline to 6.8 per cent by FY2028.
"Regardless of the June 2024 general election outcome, we expect the incoming government to pursue economic reforms to support growth, continue the infrastructure investment drive and commit to fiscal consolidation," SEND said.
S&P said it could raise India's ratings if its fiscal deficit is meaningfully reduced such that general government debt falls below 7 percent of GDP on a structural basis. It said, "If We may also raise the rating if we see sustained and substantial improvement in the central bank's monetary policy effectiveness and credibility, such that inflation is managed at a low enough rate over time."
S&P estimates that the ratio of general government debt to GDP will decline to 81 percent by FY2028, from 85 percent in FY2024.This is higher than the pre-pandemic debt burden of 75 percent of GDP, but well below the pandemic. Peas more than 90 percent.
However, S&P has maintained India's sovereign rating at the lowest investment grade 'BBB-'.
In a statement on Wednesday, the US-based agency said India's ratings could be upgraded over the next 24 months if the country adopts a cautious fiscal monetary policy that moderates increased government debt and interest while strengthening economic resilience. Reduces the burden. S&P's rating comment comes within a week of a record dividend transfer of Rs 2.10 lakh crore to the government by the RBI.This amount can be used to reduce the fiscal deficit of the Centre.
"India's outlook was revised to positive on strong growth and the rising quality of government spending; BBB- long-term and 'A-3' short-term unsecured foreign and local currency sovereign credit ratings were affirmed," S&P said.
Sovereign rating is a tool to measure the risk level of a country's investment environment and shows investors a country's ability to repay its debt. In 2010, S&P raised the outlook to stable from negative. The rating is viewed by investors as a barometer of a country's creditworthiness and has an impact on borrowing costs."Our positive outlook on India is based on its strong economic growth, improving quality of government spending and political commitment to fiscal consolidation. We believe these factors are converging to benefit credit metrics," S&P said.
It said the structure of government expenditure has been changed, with the share of infrastructure increasing. This will reduce the obstacles to taking the country on a higher growth path. S&P said that India's strong economic expansion is having a constructive impact on its credit metrics.S&P said, "We expect strong economic fundamentals to underpin growth momentum over the next two to three years. Regardless of the election outcome, we expect continuity in economic reforms and fiscal policies."
The positive outlook reflects S&P's view that continued policy stability, deepening economic reforms and high infrastructure investment will sustain long-term growth prospects. "Along with cautious fiscal and monetary policy that strengthens the economy's resilience," S&P said. "Huey reduces the government's increased debt and interest burden, could achieve higher rating in next 24 months."
S&P said the Indian economy has made a "remarkable comeback" from the COVID-19 pandemic, with India's real GDP growth forecast at 6.8 per cent this year, which would compare favorably with emerging market peers amid a global recession. Is.The agency estimates that real GDP growth over the past three years will average 8.1 percent annually, the highest in the Asia-Pacific region. It expects these growth dynamics to continue in the medium term and that GDP growth over the next three years will average 8.1 percent. Domestic product will grow by about 7 percent, which will have a moderate impact on the government debt to GDP ratio despite the fiscal deficit.
S&P said the quality of government spending has improved over the past four to five years and public investment and consumer momentum will strengthen standalone growth prospects over the next three to four years.
The Modi administration has increasingly shifted budget allocations to infrastructure spending. Capital expenditure is estimated to increase to Rs 1 lakh crore in FY2025, or about 3.4 percent of GDP.That's up from about 4.5 a decade ago. S&P believes improvements in infrastructure and connectivity in India will remove chokepoints that are hindering long-term economic growth.
India's weak fiscal setting has always been the weakest part of the sovereign rating profile. All three major global rating agencies – S&P, FITC and Moody's – have given India the lowest investment grade rating.
S&P said the economic recovery is now on good track, with the government again able to show a more concrete (albeit gradual) path to fiscal consolidation.S&P estimates the general government (Centre + State) deficit to be 7.9 per cent of GD in FY2025, which will gradually decline to 6.8 per cent by FY2028.
"Regardless of the June 2024 general election outcome, we expect the incoming government to pursue economic reforms to support growth, continue the infrastructure investment drive and commit to fiscal consolidation," SEND said.
S&P said it could raise India's ratings if its fiscal deficit is meaningfully reduced such that general government debt falls below 7 percent of GDP on a structural basis. It said, "If We may also raise the rating if we see sustained and substantial improvement in the central bank's monetary policy effectiveness and credibility, such that inflation is managed at a low enough rate over time."
S&P estimates that the ratio of general government debt to GDP will decline to 81 percent by FY2028, from 85 percent in FY2024.This is higher than the pre-pandemic debt burden of 75 percent of GDP, but well below the pandemic. Peas more than 90 percent.
