S&P affirms India rating, outlook While risks to India's long-term growth rate are rising, ongoing economic reforms, if executed well, should keep the country's growth rate ahead of peers

The government on Wednesday released Rs 6,195 crore to 14 states as the third equated-monthly instalment of the post-devolution revenue deficit grant, as recommended by the 15th Finance Commission. “This would provide them additional resources during the corona crisis," the office of the finance minister said. Earlier, on April 3 and May 11, the ministry released a similar amount to the 14 states.

Mumbai, June 10: Standard and Poor's affirmed its rating on India's longterm foreign and local currency sovereign credit at the lowest investmentgrade level and retained its stable outlook on the economy on Wednesday.

India's long-term rating was affirmed at 'BBB-' with a stable outlook and the short-term rating was held at 'A-3'.

Earlier this month, Moody's downgraded India to a notch above junk, falling in line with other global agencies, but also cut its outlook to 'negative' on the back of rising debt and persistent stress in the financial system.

S&P's stable outlook reflects its expectation that the economy will recover following the containment of the Covid-19 pandemic, and maintain its sound net external position, it said.

S&P also assumes that the government's fiscal deficit will recede markedly following a multi-year high this fiscal year.

"While risks to India's long-term growth rate are rising, ongoing economic reforms, if executed well, should keep the country's growth rate ahead of peers," S&P analysts wrote.

S&P expects the government's fiscal deficit to touch 11 per cent of GDP in 2020-21 on the back of pandemic related spending and said the government's ability to consolidate its finances once the economy begins to recover will be key in deciding the sustainability of India's debt.

India's ratings could be raised if the government significantly curtails its fiscal deficits, resulting in materially lower net indebtedness at the general government level, S&P said.

Downside pressure on ratings would emerge if GDP growth doesn't recover meaningfully from 2021 onwards and if net government deficit levels sharply exceed forecasts, it added.

"India's overall external position remains a credit strength, largely owing to the economy's limited external indebtedness," the analysts wrote.