HYDERABAD: Days after Moody’s downgraded India’s sovereign rating, S&P on Wednesday retained long-term rating at BBB- (negative) with a stable outlook, and short-term rating at A3.
It expects India’s GDP growth to contract by five per cent this fiscal, maintained that risks to growth were on the rise, and that the much-awaited economic recovery and fiscal stabilisation was visible only from 2021 onwards. Which is why, S&P affirmed the country’s long-term rating at BBB- with a stable outlook.
Subsequently, it also expects the government’s fiscal deficit to recede significantly following a multi-year high during the fiscal.
“The stable outlook reflects our expectation that India’s economy will recover following the containment of Covid-19 pandemic and the country will maintain its sound net external position,” it said, adding while risks to India’s long term growth rate were rising, ongoing economic reforms, if executed well, should keep India’s growth rate ahead of peers.
Fiscal deficit will touch a staggering 11 per cent of the GDP during the current year, largely led by the pandemic-related spending. That said, the government’s ability to consolidate its finances as the economy begins to recover will determine the sustainability of debt stock, it noted. S&P also observed that India’s current account deficit may decline this fiscal, and could improve over the forecast period, largely owing to its improved trade on weaker oil prices.