Ratings Upgrade For India Hinges On Low Inflation, Fiscal Metrics: S&P Analyst

An analyst at S&P Global Ratings has said that India’s sovereign rating could be hiked if the country achieves sustained improvement in its fiscal metrics and maintains lower inflation with monetary policy support.

Why It Matters: In May, S&P affirmed India’s “BBB-” long-term and “A-3” short-term sovereign credit ratings, while maintaining a stable outlook on the long-term rating. The current rating is constrained by India’s weak fiscal performance, Nikita Anand, associate director at S&P, said at a webinar.

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The government aims to reduce the fiscal deficit to 5.9% of the GDP by the end of the current financial year. India recorded a growth rate of 7.2% in the previous fiscal year – one of the highest among major economies.

The Reserve Bank of India (RBI) projects a growth rate of 6.5% for FY24, while S&P expects an average economic growth of 6.7% in the coming years.

S&P believes that the RBI will wait until inflation risks have subsided before considering rate cuts.

Earlier this month, finance ministry officials met with ratings agency Moody's to push for the upgrade, discussing borrowing, disinvestment targets, and state budgets, according to multiple media reports.

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