In a boost to Prime Minister Narendra Modi ahead of his arrival in the US, S&P today raised India’s credit rating outlook to stable on the back of strong political mandate helping fiscal and economic reforms.
Standard & Poor’s, after a gap of two years, has improved India’s sovereign credit rating outlook from negative to stable indicating the possibility of a rating upgrade.
Our outlook revision indicates that we believe the current government’s strong mandate will enable it to implement many of its administrative, fiscal, and economic reforms, S&P said in a statement.
The revision in outlook comes ahead of Modi’s high profile visit to the US, which among things is aimed at procuring investments. Modi is scheduled to meet top US corporates.
The outlook revision gave a boost to the stock markets with the BSE Sensex shooting up by 158 points to 26,626.32.
The present government, S&P said will remedy, to varying degrees, the growth impediments–policy paralysis, energy supply bottlenecks, and administrative obstacles. The government’s actions will likely add momentum to the incipient cyclical upswing evident in the economy.
Commenting on the action, Finance Secretary Arvind Mayaram said the Indian economy can grow by more than 5.5 per cent in the current fiscal year.
We are satisfied that the credit rating agency has acknowledged the steps that government has taken to improve the economy and specially bring the investment climate back and therefore the growth cycle back, he added.
S&P said it could raise the rating if the economy reverts to a GDP trend growth of 5.5 per cent and there are improvements in fiscal, external or inflation metrics.
The agency currently has a ‘BBB-/A-3′ rating on India.
SBI Chairperson Arundhati Bhattacharya said S&P’s action is a reflection of India’s sound external position, supported by robust capital inflows and a benign CAD.