S038;P ups India146;s forex rating

This could be good news for the Manmohan Singh government, which is fighting a tough battle to control soaring inflation. In a move that cou...

This could be good news for the Manmohan Singh government, which is fighting a tough battle to control soaring inflation. In a move that could enable India to attract higher foreign investment, global rating agency Standard 038; Poor8217;s on Monday upgraded India8217;s foreign currency rating.

The US-based rating firm revised its outlook on India8217;s 8216;8216;BB8217;8217; long-term foreign currency rating to 8216;positive8217; from 8216;stable8217; based on the improving external position. The outlook on the 8220;BB8221; long-term local currency rating was also revised to stable from negative, S038;P said.

However, India8217;s sovereign rating is still in the junk bond status as S038;P has not upgraded India8217;s status from 8216;BB8217; to 8216;BBB8217;. Firms feel the improvement in rating will prompt foreign investors FIs to step up investments. Many FIs and even governments abroad look at the country8217;s rating before investing. Corporates can also access funds abroad at a cheaper level.

8216;8216;This will enable foreign firms to invest in equity participation in Indian companies. There will be an interest reduction since more fund will be available in the market. Indian companies will now borrow ECBs at a very competitive rate,8217;8217; says Wockhardt8217;s Rajiv B. Gandhi. Mahindra 038; Mahindra8217;s Uday Phadke said this is a reflection of their confidence and our growth prospects.

8216;8216;The outlook revisions reflect better prospects for the government8217;s debt burden to stabilise,8217;8217; said S038;P8217;s credit analyst Ping Chew.

However, S038;P warned that the local currency rating could be lowered if the fiscal deficit was large and the debt burden grew. 8216;8216;The forex rating could be upgraded, provided the domestic debt burden moderates. But, if the fiscal deficit remains large and the debt burden rises, the local currency rating could be lowered,8217;8217; Chew said. The country8217;s fiscal weakness was the worst among rated sovereigns, leaving it vulnerable to economic cycles and any decline in growth rates, S038;P said.