Ratings agency Standard & Poor’s raised India’s credit outlook to “stable” on Friday (Sep 26) , saying the prospects for economic reforms had grown under Prime Minister Narendra Modi’s new right-wing government.
Although S&P kept its main sovereign credit rating unchanged at “BBB-“, the agency said it was “revising the outlook on the long-term rating to stable from negative” as it expected growth rates to pick up pace.
“The stable outlook reflects our expectation that the newly elected government will be able to implement reforms that spur growth, which in turn improves fiscal performance,” it said in a statement. “India’s improved political setting offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management,” it added.
The announcement comes a day after the Asian Development Bank also expressed hope of a “turnaround” in India’s economy under Modi who coasted to victory in May’s general election on a pro-business platform. Modi is beginning his first visit this weekend to the United States since his election, a trip which is largely focused on boosting trade and attracting investment.
India’s economy expanded 5.7 per cent in the first quarter of the financial year, the best quarterly performance in over two years. A sharp narrowing of its current account deficit – the broadest measure of trade – also boosted investor sentiment.
But despite winning the biggest mandate in 30 years, Modi’s Bharatiya Janata Party (BJP) government is yet to introduce big-ticket reforms that analysts say are needed to really fire up growth.
S&P said implementation of reforms was key if India hopes to maintain or improve its ratings. “We may lower the rating if the government’s structural reform agenda stalls such that economic growth does not accelerate, or fiscal and debt ratios fail to improve,” the agency warned.
Source : Channel News Asia | September 26, 2014