S&P less moody, less cheerful Keeps its sovereign rating for India unchanged with 'stable' outlook

Standard & Poor's has not followed in Moody’s footsteps and kept its sovereign rating for India unchanged at 'BBBminus' with 'stable' outlook, saying that vulnerabilities stemming from low per capita income and high government debt balance strong GDP growth.

The action was swiftly termed by Sanjeev Sanyal, the Principal Economic Adviser, as "a bit unfair." The S&P rating comes days after Moody's raised India's sovereign rating for the first time in over 17 years on growth prospects boosted by continued economic and institutional reforms.

Railways and Coal Minister Piyush Goyal said S&P has been historically more conservative. Economic Affairs Secretary Subhash Chandra Garg said S&P chose to pay cautious and hoped that the reforms will reflect in a ratings upgrade next year. "We are not disappointed but our expectation would be that S&P also takes into account what the government has done," he said, adding that S&P has said everything that Moody's also stated in its rating upgrade. S&P has reaffirmed India story, he said. He went on to add that the government will stick to the fiscal consolidation path.

S&P, however, said the Narendra Modi government has managed to pass a number of reforms to address long-standing impediments to the country's growth. Then, it adds by way of caution: "But, confidence and GDP growth in 2017 appear to have been hit by the sudden demonetisation exercise in late 2016. The July 1, 2017 introduction of the GST, which combines the central, state, and local-level indirect taxes into one, has also led to some one-off teething problems that have dampened growth."

S&P has long maintained a more cautious approach than Moody's, having kept India at the current rating of "BBB-minus", the lowest investment-grade, since 2007. The agency did change its outlook to "stable" from "negative" in 2014.