Ratings agency S&P has raised India’s sovereign rating outlook to ‘positive’ from ‘stable’, citing the country’s strong economic performance. However, S&P has kept the rating itself at ‘BBB-’, the lowest investment grade. Finance Minister Nirmala Sitharaman welcomed the change, stating that it “reflects the country’s solid growth performance and a promising economic outlook.”However, some have called the move ‘rare’ and ‘puzzling’ for various reasons.
Here are some:
The timing: The announcement comes just days ahead of the general election results due on 4 June. Some experts say that the outcome of the elections and the priorities of any new government would have a significant impact on India’s future prospects and therefore any change after 4 June would have made more sense. S&P, however, said that it anticipated substantial consistency in economic reforms and fiscal policy, regardless of the election results.
The wait: This is the first outlook revision by S&P for India since 26 September, 2014. “They are behind the curve… India is in much better positioned than what S&P is making out to be,” PM’s Economic Advisory Council member Sanjeev Sanyal told NDTV Profit reacting to the change in outlook. Two other agencies in the so-called Big Three – Fitch and Moody’s – have a ‘stable’ outlook for India.
The rating: While S&P has upgraded its outlook for India’s economy to positive, it has retained India’s sovereign credit rating to the lowest investment grade and the lowest it offers. The sovereign rating measures India’s ability to repay its debt – a higher rating indicates a higher ability to repay, and therefore, lower borrowing costs. India has never defaulted on its debt payments. If India’s economy is robust and its bonds attract global buyers, how can its credit rating be barely investment grade, question some economists. “By any objective criteria, India should actually be rated one, if not two, notches above where it is right now,” says Sanyal.
A Times of India citing Citi said that S&P Global Ratings’ is likely to upgrade India’s sovereign rating by late 2026.
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Three reasons why S&P’s India outlook change is puzzling some
