S&P reaffirms India's rating, retains outlook at 'stable'

S&P has maintained a stable outlook on the basis of their expectation that over the next two years the growth will remain strong and India will maintain its sound net external position and fiscal deficit will remain elevated but broadly in line with their forecast.

Illustration: Dominic Xavier/Rediff.com

Global rating agency S&P has reaffirmed sovereign rating of India with stable outlook, Economic Affairs Secretary Atanu Chakraborty said on Tuesday.

The rating action comes weeks after another global agency Moody's Investors Service lowered the country's rating outlook to "negative" from "stable".

"S&P has reaffirmed sovereign rating of India at BBB- with stable outlook.

“They have stated that India's economy continues to achieve impressive long-term growth rates despite a recent deceleration," Chakraborty said in a tweet.

'BBB' signifies adequate capacity on an entity to meet its financial commitments.

However, adverse economic conditions or changing circumstances are more likely to weaken its capacity to meet financial commitments.

The rating action comes at a time when the government is facing flak from opposition parties for not doing enough to check the slide in economic growth, which hit six year lower low of 4.5 per cent in the second quarter of the current fiscal.

"India's economy continues to achieve impressive long term growth rates despite a recent deceleration. It is believed that the economic slowdown is cyclical rather than structural," the finance ministry said in a statement quoting summary publication on India by S&P.

Standards and Poor's (S&P) also expects the Indian economy to continue to out-perform its peers and that the growth will remain strong over the next two years.

They have maintained a stable outlook on the basis of their expectation that over the next two years the growth will remain strong and India will maintain its sound net external position and fiscal deficit will remain elevated but broadly in line with their forecast, the ministry said.

In November, Moody's Investors Service has cut India's credit rating outlook to negative - the first step towards a downgrade, saying the government has been partly ineffective in addressing economic weakness, leading to rising risks that growth will remain lower.

Another international agency, Fitch Ratings continues to hold the country's outlook at stable.

The government has been taking slew of measures, including sharp reduction corporate tax to boost economy.

Besides, the Reserve Bank has been extending support to government's effort by repeatedly cutting key policy rate.