S&P Global Ratings affirmed credit ratings of India on Friday despite weakening fiscal settings and a record economic contraction caused by the global coronavirus pandemic.
The agency maintained the rating at ‘BBB-‘ citing the economy’s above-average long-term real growth, sound external profile and evolving monetary settings.
“India’s democratic institutions promote policy stability and compromise, and also underpin the ratings,” the agency said.
“These strengths are balanced against vulnerabilities stemming from the country’s low per capita income and weak fiscal settings, including consistently elevated general government deficits and indebtedness,” said S&P.
The outlook on the ratings was stable as the agency expects India’s economy to recover following the resolution of the Covid-19 pandemic, and that the country’s strong external settings will act as a buffer against financial strains.
After experiencing a record contraction in fiscal 2021, India’s economic activity is set to begin to normalize in fiscal 2022, resulting in real GDP growth of about 10 percent, the agency assessed.
According to S&P, India’s fiscal deficit will rise to about 12.5 percent of GDP this year, largely driven by much weaker revenue generation. The deficit consolidation over the next three years is expected to be gradual.
The material has been provided by InstaForex Company – www.instaforex.com