S&P retains India’s sovereign rating at BBB- with stable outlook

S&P said the economic hit from COVID-19 will exacerbate India’s weak fiscal settings, but the country will get into the path of fiscal consolidation over the next three years. (File)

S&P Global Ratings Wednesday affirmed its ratings on the country’s long-term foreign and local currency sovereign credit at lowest investment grade and maintained a stable outlook, arguing that “India’s economy is likely to achieve a strong recovery following the deep contraction in this fiscal year; forecasting real GDP growth at 8.5 per cent” in FY22.

It affirmed India’s long-term rating at ‘BBB-’ with a stable outlook and short term rating at ‘A-3’. S&P also said the economy faces stark challenges in the near-term.

Explained

Relief after Moody’s action

THE S&P review will give relief to policy makers and financial markets participants, especially after a downgrade by Moody’s last week heightened risks of India slipping into a non-investment grade rank.

Meanwhile, Fitch Ratings said that after a 5 per cent contraction in the current fiscal, the country’s economy is forecast to bounce back with a sharp growth rate of 9.5 per cent next year provided it avoids further deterioration in financial sector health.