ARC ratings affirms 'BBB+' rating on India

Global rating agency ARC Ratings on Monday affirmed the 'BBB+' foreign currency rating for the country and 'A-' local currency sovereign rating of the government. The agency also affirmed its 'A-' foreign currency and 'A' local currency country ceilings for the country, it said in a report here on Monday. "India’s stable ratings reflect our expectations for accelerating growth over the near- and medium-term.

Country’s growth prospects over the next few years likely hover around the 7 percent range, and could be north of that if the structural reform effort is pursued more vigorously," it said. The report said growth this year is likely to exceed 7.5 percent, assisted by a generally baseline monsoon. The agency said the ratings also reflect its expectation for stability of the current account deficit despite lacklustre export performance.

The current account deficit for FY15 stood at (-)1 percent of GDP, and reserves continue to expand. The report said the country’s main credit strengths include -- a fast growing economy, with growth expected to register upward of 6 percent per year over the medium-term and a comfortable external situation characterised by low external debt. Besides, the country has unblemished debt repayments record, it said.

The agency said the main credit weaknesses is weak government finances both at the central and state government levels, owed partly to low revenue yield and government inefficiencies. "Slow progress in structural reforms continue to constrain the country’s economy and growth potential," it said. Key reforms that would substantially improve economic performance, including land and labour market reform, remain inert.