(Reuters) – Credit ratings agency S&P Global upgraded India’s long-term unsolicited sovereign credit ratings to “BBB” from “BBB-” on Thursday, citing economic resilience and sustained fiscal consolidation.
COMMENTARY:
SUVODEEP RAKSHIT, CHIEF ECONOMIST, KOTAK INSTITUTIONAL EQUITIES
The ratings upgrade from S&P reflects the impact of prudent fiscal policy. The central government’s quality of expenditure has improved along with a more long term focus on fiscal improvement by targeting debt.
GAURA SEN GUPTA, CHIEF ECONOMIST, IDFC FIRST BANK
The upgrade reflects the centre sticking to its fiscal consolidation path post the COVID shock. There has also been focus on improving the transparency of fiscal accounts by reducing off balance sheet items .
On the other metrics such as external account, inflation and growth, India is on a stronger footing than its BBB peers.
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
The rating upgrade by S&P recognises the fiscal consolidation efforts by the government over the last few years and improving long-term growth prospects due the significant improvement in infrastructure, logistics and ease of doing business in the country. The rating upgrade is likely to be a positive not just for the bond market but medium term prospects of attracting foreign investments.
While tariff risks and slowdown in global growth continue to loom over the growth outlook for this year, the continued strength of the domestic economy, particularly rural, could provide some cushion.
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
India should already have been in a “BBB” category. That said, at this point in time, we believe that India’s growth resilience and fiscal consolidation could slightly be put to test this year. Yet, the very fact that India would still remain the fastest growing large economy despite a potentially slower growth does suggest that the decision was long overdue.
AISHVARYA DADHEECH, CHIEF INVESTMENT OFFICER AT FIDENT ASSET MANAGEMENT
This will boost debt inflows and ease worries over the long-duration bond rally faltering due to dwindling demand from banks. The development could bring in long-term tactical and strategic inflows and support sentiment in debt markets. For equities, it is a minor sentimental positive and a reassurance of strength in domestic economy.
SUJAN HAJRA, CHIEF ECONOMIST & EXECUTIVE DIRECTOR, ANAND RATHI GROUP, MUMBAI
S&P’s upgrade of India’s rating from BBB- to BBB is certainly a welcome development — but it is also, by any reasonable measure, too little and too late. What market participants and India-watchers have long recognised is only now being acknowledged by the rating agencies. The reality is that India’s economic and financial dynamism has far outpaced its perceived credit risk.
The positive trajectory of Indian equities and other asset classes is likely to continue, propelled by the same structural strengths that have underpinned their outperformance for years — irrespective of the verdicts handed down by credit rating agencies.
KRANTHI BATHINI, DIRECTOR OF EQUITY STRATEGY AT WEALTHMILLS SECURITIES
India has maintained strong fiscal discipline in recent years, keeping the current account deficit within a manageable range. This, along with robust domestic macros and a growth-supportive monetary stance from the RBI, has underpinned S&P’s upgrade from BBB– to BBB positive. Near-term tariffs may impact select companies, but they pose little threat to long-term GDP growth.
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI
The government’s consistent and strong commitment to fiscal consolidation along with a focus on debt sustainability and superior macro stability has been the key factor driving India’s rating upgrade. The government in last few years has perhaps shown the most aggressive fiscal consolidation among global peers along with efforts to enhance supply side of economy that has yielded benefit in terms of low and stable inflation. All this feeds into India’s rating upgrade.
MADHAVI ARORA, CHIEF ECONOMIST, EMKAY GLOBAL
The upgrade is a reflection of the efforts to ensure macroeconomic stability and the resilience of the balance sheet of all economic agents.
The upgrade will impact asset classes across the board and will help draw quality flows to the market.
TERESA JOHN, LEAD ECONOMIST, NIRMAL BANK INSTITUTIONAL EQUITIES, MUMBAI
The rating upgrade reflects India’s stable macroeconomic fundamentals and will be positive for bond yields, which have seen some uptick of late.
We continue to expect 25-50bps of rate cuts on the back of inflation likely undershooting RBI’s forecasts and a cyclical growth slowdown amid trade tensions. Stable macrofundamentals also provide room for some countercyclical policy easing.
(Reporting by Ira Dugal, Aleef Jahan, Nishit Navin, Bharath Rajeswaran, Kashish Tandon, Hritam Mukherjee, Anuran Sadhu; Editing by Harikrishnan Nair)
