Opinion
Mint Quick Edit | Will S&P upgrade India’s awkward credit rating?
Summary
- S&P Global Ratings raised India's sovereign rating outlook to 'positive,’ citing robust economic growth and improved expenditure quality. But BBB minus is the lowest investment grade. This sits awkwardly with a growing global appetite for Indian government bonds.
S&P Global has raised the outlook on India’s credit rating to “positive" from “stable" while affirming its rating of BBB minus. It cited robust economic growth and improved expenditure quality for the move, which puts India’s sovereign rating in the reckoning for an upgrade. A positive outlook implies better odds of the rating moving up than down.
Whether the agency rates the country in a better position to repay its debt would depend on a complex assessment that takes into account parameters such as the government’s fiscal deficit, the economy’s growth and a bunch of other variables. While India’s macro numbers broadly seem to be moving in the right direction, government officials have long complained of a raw deal from global rating agencies.
Independent India has never defaulted on debt repayments. This partly underpins global demand for Indian sovereign bonds that are open to foreign investors. Inflows from abroad into these are expected to surge once they’re included in marquee global indices. If India’s economy continues to do well and such bonds attract many more buyers, a credit rating that barely considers them investment grade will look awkward.
