S&P Raises India’s Outlook To Positive On Robust Growth; FM Nirmala Sitharaman Welcomes Revision

After a gap of about 10 years, S&P Global Ratings on Wednesday raised India’s outlook to positive from stable on robust growth prospects for next three years and public spending, and raised hopes for an upgrade in two years provided the government continues reforms and policies to keep fiscal deficit under check.
While retaining India’s sovereign rating at the lowest investment grade of ‘BBB-‘, S&P said it expects broad continuity in economic reforms and fiscal policies, irrespective of the election outcome.
Results of the ongoing general elections will be announced on June 4. “India outlook revised to positive on robust growth and rising quality of government spend,” S&P said, while affirming long-term rating at ‘BBB-‘.
Finance Minister Nirmala Sitharaman On S&P Rating
Finance Minister Nirmala Sitharaman welcomed the revision in outlook saying it reflects solid growth performance and promising outlook for the coming years.
“India is well on track to become the third-largest economy in the third term of the government and become a Viksit Bharat by 2047,” Sitharaman said in a post on X.
Sovereign ratings are looked at by investors as a barometer of the country’s creditworthiness and has impact on borrowing costs. Last in 2014, S&P had upped India’s outlook to stable from negative.
“Our positive outlook on India is predicated on its robust economic growth, pronounced improvement in the quality of government spending, and political commitment to fiscal consolidation. We believe these factors are coalescing to benefit credit metrics,” S&P said.
S&P On Upcoming Govt’s Economic Reforms
Irrespective of the June 2024 general election results, S&P expects the incoming government to carry on economic reforms to support the “growth vigor”, continued infrastructure investment drive, and commitment to fiscal consolidation.
The finance ministry has been pushing for a rating upgrade on the back of improved fiscal management and strong economic fundamental, including high foreign exchange reserves.
S&P’s rating commentary comes within a week of the RBI’s record Rs 2.10 lakh crore dividend transfer to the government. The funds may be used to reduce the Centre’s fiscal deficit.
The government hopes to bring down fiscal deficit to 5.1 per cent of GDP by March 2025 and further to 4.5 per cent by March 2026.
S&P Outlook On India’s Economic Growth
“We expect sound economic fundamentals to underpin the growth momentum over the next two to three years. Regardless of the election outcome, we expect broad continuity in economic reforms and fiscal policies,” S&P said.
It said the composition of government spending has been transformed, with an increasing share going to infrastructure. This will ease bottlenecks to put the country on a higher growth trajectory.
“We expect sound economic fundamentals to underpin the growth momentum over the next two to three years. Regardless of the election outcome, we expect broad continuity in economic reforms and fiscal policies,” S&P said.
The positive outlook reflects S&P’s view that continued policy stability, deepening economic reforms, and high infrastructure investment will sustain long-term growth prospects.
“That, along with cautious fiscal and monetary policy that diminishes the government’s elevated debt and interest burden while bolstering economic resilience, could lead to a higher rating over the next 24 months,” S&P said.
(With Inputs From PTI)