Rating agency S&P Global has retained ‘A-3’ short-term and ‘BBB’ long-term unsolicited local and foreign currency sovereign credit ratings in India with a stable outlook. India’s above-average GDP growth and overall economic profile can be clearly reflected in the ratings by the agency.
In a statement issued by the firm, it says, “India’s strong democratic institutions promote policy stability and compromise, and also underpin the ratings.” It also stated, “These strengths are balanced against vulnerabilities stemming from the country’s low per capita income and consistently elevated fiscal deficits that contribute to high general government debt, net of liquid assets.”
S&P Global also stated that these ratings are despite the recent deprivation in the economic growth. The firm further added that it expects India’s GDP to continue to grow at a substantial rate that is still higher than the average of nations with a similar income level.
The rating agency also acknowledged the steep decline in the economic growth of India. It said, real GDP growth fell to a more than six-year low of 4.5 per cent year-on-year in the second quarter of this fiscal year (ending March 31, 2020). This is the fifth consecutive quarter of decline in year-on-year growth rate.”
It also said that the tighter lending market is resulting in the decline in the credit market while also maintaining that India is not experiencing a structural but a cyclical economic slowdown. “The economy’s long-term outperformance highlights its resilience. India’s wide range of structural trends, including healthy demographics and competitive unit labour costs, work in its favour.”
The government is taking a number of steps such as forcing all the financial institutions to take account of all their non-performing assets so that they can take strict steps to repair their balance sheets.
It also stated that better implementation of the regulations in the real estate sector also contributed in the disruption in the financial creditor’s business practises, resulting in the overall slowdown in many sectors.