S&P to retain India’s current sovereign rating for two years

New Delhi, May 7

S&P Global Ratings on Friday said India’s credit rating would be retained at the current level for the next two years, and the country will see a slightly faster pace of growth in the next couple of years that will support its sovereign rating.

S&P, which had in March seen the Indian economy growing by 11% in the fiscal year to March 2022, saw GDP growth rate dropping to 9.8% under the ‘moderate’ scenario, where infections peak in May, and falling to as low as 8.2% in ‘severe’ scenario under which caseload would peak only in late June.

Impact of second Covid wave

• There could be upside pressure on general government fiscal deficit forecast of 11% as revenue generation would be weaker, but debt stock would remain roughly stable just above 90% of GDP, the rating agency said
• In the severe scenario, there could be more additional fiscal spending from the government and revenue growth would be weaker. This would mean that debt stock would stabilise only in the next financial year

Speaking at a webinar on ‘What A Drawn Out Second Covid Wave Means For India’, S&P Global Ratings Director (Sovereign and Public Finance Ratings) Andrew Wood said in the moderate downside scenario there would not be any major impact on the government’s fiscal position.

There could be upside pressure on general government fiscal deficit forecast of 11% as revenue generation would be weaker, but debt stock would remain roughly stable just above 90% of GDP, Wood added.

In the severe scenario, there could be more additional fiscal spending from the government and revenue growth would be weaker. This would mean that debt stock would stabilise only in the next financial year, he noted.

“India’s rating remains stable on a ‘BBB-’ rating. We do not expect there to be a change in the rating level over the next 2 years...Of course, there are going to be some near term ramification on India’s economy stemming from the severe second wave of Covid and that may peep through into our sovereign credit metrics...,” Wood said. — PTI