S&P affirms India's sovereign rating, says outlook stable in long-term

Global rating agency S&P Global Ratings on June 10 affirmed 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings on India, dispelling fears that a rating downgrade is on the cards.

The agency said the outlook on the long-term rating is stable.

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The ratings, S&P said, reflects India’s above-average real GDP growth, sound external profile, and evolving monetary settings.

The agency said it sees a strong recovery from India after a deep contraction in FY21, with the GDP growth at 8.5 percent in FY22.

It does, however, note that a weak financial sector and rigid labour markets, if not addressed, could hamper the country's recovery.

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"While risks to India's long-term growth rate are rising, ongoing economic reforms, if executed well, should keep the country's growth rate ahead of peers," S&P said in a statement.

S&P has forecast India's economy to shrink by 5 percent this 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," S&P said while affirming India's rating at 'BBB-' and maintaining a stable outlook.

The stable outlook also assumes that the government's fiscal deficit will recede markedly following a multi-year high in fiscal year 2021, it added.

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