Rating agency S&P Global on Friday reaffirmed its ‘BBB-‘ long-term and ‘A-3’ short-term foreign and local currency sovereign credit ratings on India. The global rating agency added that its outlook on the long-term rating is stable. “India’s economy will experience a record contraction in fiscal 2021 (year ending March 31, 2021), largely owing to the global COVID-19 pandemic. We expect real GDP growth to recover from fiscal 2021 onwards,” S&P Global said in a release. The ‘BBB-’ rating is the lowest investment-grade rating on the rating agency’s scale that hints that the entity has adequate capacity to meet financial commitments but has certain risks aligned with the economic condition.
S&P Global said that India’s weak fiscal setting will worsen this year, constraining the government’s ability to aid the economy. “At the same time, the country’s external settings have improved, helped by the central bank’s rapid accumulation of foreign exchange reserves,” it added. The stable outlook by S&P reflects their view that after this fiscal’s contraction the economy will recover to stabilize the country’s broader credit profile. To add to that S&P Global said that strong external settings will act as a buffer against financial strains for India despite elevated government funding needs over the next 24 months.
Source: Financial Express
