S&P Global Ratings holds India rating at BBB- with stable outlook

Global rating agency S&P Global Ratings has confirmed 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings for India, dismissing fears that a rating downgrade is bound to ensue.

According to the agency, the outlook on the long-term rating is stable. It mirrors India's above-average real GDP growth, evolving monetary settings and sound external profile. The stable outlook presumes the government's fiscal deficit will recede markedly following a multi-year high in FY21. The agency said it foresees India making a strong recovery after the anticipated deep contraction in FY21, with GDP growth at 8.5 per cent in FY22. As per its predictions, India's economy will shrink by 5 per cent this fiscal.

Nonetheless, it reinstates that situations such as a weak financial sector and rigid labour markets need to be addressed to prevent hampering of the country's recovery. The agency further added that although risks to India's long-term growth rate continue to rise, executing our ongoing economic reforms well should keep the country's rate of growth ahead of peers.