S&P rules out rating upgrade, govt sulks

If the rating has not been improved, it’s a matter which doesn’t bother us so much. It’s a question which calls for an introspection among those who do the rating

NEW DELHI: Standard & Poor’s (S&P) affirmed India’s sovereign ratings on Wednesday, welcoming the country’s policy stability and improved monetary credibility, but ruled out any upgrade for this year or in 2017 because of weak public finances and low per capita income.

The move triggered strong reaction from the government, which asked the US-based rating agency to introspect since there appeared to be a disconnect between its thinking and investor perception.

S&P Global Ratings maintained the lowest investment grade rating of ‘BBB-’ with a ‘stable’ outlook for India, saying it would need to see more efforts to lower the government debt level to below 60% of GDP. “The stable outlook balances India’s sound external position and inclusive policymaking tradition against the vulnerabilities stemming from its low per capita income and weak public finances,” S&P said in a statement.

“The outlook indicates that we do not expect to change our rating on India this year or next, based on our current set of forecasts.”

The agency said its stance was basedonitsexpectationsthatfiscal revenueswouldnotriseenoughto meaningfullyreducethecountry’s deficit over the medium term, while noting the government’s borrowing remained “high”. It also expressed concerns that the government could delay subsidy cuts, while noting the country’s banking sector would likely need capital infusions of about $45 billionby2019tomeetglobalBaselIII or capital adequacy norms.

Like S&P, Fitch also rates India at ‘BBB-’ with a ‘stable’ outlook. Moody’s Investors Service rates India at ‘Baa3’, but with a “positive” outlook.

Economic affairs secretary Shaktikanta Das said the upgrade did not come despite the fact that reforms undertaken by India unparalleled any major economy anywhere in the world.

PTI & REUTERS