India's rating upgrade hinges on sustainable fiscal consolidation, low inflation: S&P analyst
Business
Govt aims to cut fiscal deficit to 5.9pc of GDP by the end of the current financial year
MUMBAI (Reuters) – S&P Global Ratings could consider an upgrade in India's sovereign rating if the country's fiscal metrics improve on a sustained basis and inflation is persistently lower, aided by monetary policy actions, an analyst at the agency said on Wednesday.
S&P in May affirmed its 'BBB-' long-term and 'A-3' short-term, unsolicited foreign and local currency sovereign credit ratings on India, while retaining the outlook on the long-term rating at stable.
Currently, India's rating remains constrained because of its weak fiscal performance, Nikita Anand, associate director, financial institutions ratings at S&P, said at a webinar.
The government aims to cut its fiscal deficit to 5.9 per cent of gross domestic product by the end of the current financial year. India's growth in the previous fiscal year ended on March 31 was 7.2pc, one of the highest among big economies.
The Reserve Bank of India (RBI) projects the economy will grow 6.5pc in FY24, while S&P expects average economic growth of 6.7pc over the next few years.
The RBI will not be in a hurry to cut rates until inflation risks have fully ebbed, said Vishrut Rana, senior economist, Asia-Pacific at S&P.
Retail inflation in May was at an over two-year low of 4.25pc, and fell within the central bank's 2pc-6pc target band for the third straight month.
Earlier this month, the government held talks on the state of the economy with Moody's Investors Service and pitched for a ratings upgrade, Reuters reported, citing sources.
Read more: Indian officials to meet Moody's for improved rating
Meanwhile, Indian banks' slippages have normalised and bad loans are well-covered by accelerated write offs, according to other analysts at S&P.
Banks' loan growth momentum is also expected to be in-line with nominal gross domestic product growth in India, they said.
