New Delhi: S&P Global Ratings on Wednesday kept its sovereign credit rating for India unchanged at the lowest investment grade (BBB-) with a stable outlook and ruled out an upgrade till 2017-end, drawing criticism from the government.

“The ratings on India reflect the country’s sound external profile and improved monetary credibility. India’s strong democratic institutions and a free press, which promote policy stability and predictability, also underpin the ratings. These strengths are balanced against vulnerabilities stemming from the country’s low per capita income and weak public finances," the rating company said in a statement.

The government expressed its disappointment. “The report of S&P says all the right things done by India. But still if the rating has not been upgraded, it does not bother us so much but it calls for an introspection among those who do the rating," economic affairs secretary Shaktikanta Das told reporters.

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The finance ministry had also objected in September to a statement by Moody’s Investors Service that it was unlikely to upgrade India’s rating anytime soon. It has assigned the lowest investment grade (Baa3) for India with a positive outlook, as has Fitch Ratings.

S&P said upward pressure on ratings could build if reforms markedly improve general government fiscal outturns and bring net general government debt below 60% of GDP. “Downward pressure on the ratings could re-emerge if growth disappoints (perhaps as a result of stalling reforms); if, contrary to our expectations, the new monetary council is not effective in achieving its targets; or if the external liquidity position of the nation deteriorates more than we currently expect," it said.

It praised the government for progress on the passage of laws to address long-standing impediments to growth. “These include comprehensive tax reforms through the likely introduction in the first half of 2017 of a goods and services tax to replace complex and distortive indirect taxes," it said.

S&P projected India’s GDP growth at 7.9% in 2016 and 8% on average over 2016-18. It expects the current account deficit to moderate to 1.4% of GDP in 2016 from 2.1% in 2015 and to average similar levels through 2018.

S&P said that although it expects the government to pursue medium-term fiscal consolidation, planned revenues may not fully materialize and subsidy cuts may be delayed. “In the medium term, we expect improved fiscal performance primarily from revenue-side improvements brought about by the coming introduction of the GST and administrative efforts to expand the tax base," it added.

The firm said it expects the Reserve Bank of India (RBI) will achieve the inflation target of 5% by March 2017. “We believe these RBI measures will support its ability to sustain economic growth while attenuating economic or financial shocks," it said.

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