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India's rating outlook upgraded to positive on growth, improved government spending

The last time when the rating agency upgraded India's outlook was in 2014, from negative to stable. And in 2024, the agency has again upgraded it from stable to positive.

Reported By: PTI New Delhi Updated on: May 29, 2024 19:17 IST
Representational image
Image Source : PTI Representational image

S&P Global Ratings on Wednesday upgraded India's sovereign rating outlook to positive from stable while retaining the rating at 'BBB-' on robust growth and improved quality of government expenditure.

S&P said it could upgrade India's sovereign rating in the next 2 years if the country adopts a cautious fiscal and monetary policy that diminishes the government's elevated debt and interest burden while bolstering economic resilience.

"The positive outlook reflects our view that continued policy stability, deepening economic reforms, and high infrastructure investment will sustain long-term growth prospects," S&P said.

S&P revised outlook on India to positive from stable.

At the same time, it affirmed BBB- long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings, it said.

BBB- is the lowest investment grade rating. The agency had last upgraded the rating outlook to stable from negative in 2014.

The US-based agency said it may raise the ratings if India's fiscal deficit narrows meaningfully such that the general government debt falls below 7 per cent of GDP on a structural basis.

"The protracted rise in public investment in infrastructure will lift economic growth dynamism that, combined with fiscal adjustments, could alleviate India's weak public finances. We may also raise the ratings if we observe a sustained and substantial improvement in the central bank's monetary policy effectiveness and credibility, such that inflation is managed at a durably lower rate over time," S&P said.

All three major global rating agencies -- S&P, Fitch and Moody’s -- have accorded the lowest investment grade rating to India. However, Fitch and Moody's still have stable outlook on their ratings.

The ratings are looked at by investors as a barometer of the country’s creditworthiness and has impact on borrowing costs.

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