No immediate impact but growing India-Pak tensions could heighten credit risks: S&P Global

The recent tensions have been the fallout of Operation Sindoor, under which India targeted nine terror hubs in Pakistan and Pakistan-Occupied Kashmir

India’s sovereign credit rating has not been affected so far by the growing hostilities with Pakistan despite increased regional credit risks, a report by S&P Global Ratings said.

“We see no immediate impact on our sovereign credit ratings on India (BBB-/Positive/B) and Pakistan (CCC+/Stable/C). Nevertheless, the situation raises the specter of miscalculations and accidental clashes that could escalate well beyond the intentions of both sides. Such a scenario would materially worsen credit risks,” the global ratings agency said in a bulletin.

The ratings agency further said that it expects the tensions to “remain high” for the next two-three weeks, with more military action likely.

“However, the situation is likely to de-escalate following that, leaving little persistent negative impact on sovereign credit metrics.”

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It also said it expects India to maintain “strong economic growth”, while Pakistan keeps its focus on supporting the recovery of its economy. Moreover, a prolonged conflict could dent New Delhi’s ability to attract foreign investors, which could hinder its efforts to draw global manufacturers.

The conflict will also derail the “improvements to Pakistan’s external and fiscal metrics” that would support a return to macro stability.

The recent tensions have been the fallout of Operation Sindoor, under which India targeted nine terror hubs in Pakistan and Pakistan-Occupied Kashmir. The strike was in response to the Pahalgam terrorist attack that led to the death of 26 civilians.

On May 8, India's government briefed all the national parties about the developing situation and Union minister Kiren Rijiju said that the operation is "still ongoing".