S&P Affirms India's Credit Rating; Expects Strong Fundamentals To Support Growth

S&P Global Ratings stated on Thursday that the Indian economy is doing well despite difficult global economic conditions and that strong fundamentals will support its growth over the next two to three years. S&P Global Ratings also maintained the nation's sovereign credit grade.

S&P maintained its stable long-term rating outlook while reiterating its short-term, unsolicited foreign and local currency sovereign credit ratings of "A-3" and "BBB-," respectively, as per Reuters report.

"The stable rating outlook reflects our expectation that India's sound economic fundamentals will be sufficient to offset the government's weak fiscal performance, helping to sustain elevated government funding needs and a high interest burden over the next 24 months," analysts wrote in a release.

S&P projects that India's GDP will expand by roughly 6% in 2023-2024, with the prospects for future development being aided by investments and strong consumer demand.

Despite the country's still-weak public finances, S&P assessed that the quality of the government's fiscal programmes has improved due to robust growth in capital expenditure (capex) allocations.

"More effective capex programs should help alleviate India's widespread shortfall in physical infrastructure capacity. Over time, this would support the productive capacity of the economy," it added.

Despite significant revenue growth, the rating agency stated that fiscal consolidation in India has lagged behind regional counterparts at a comparable rating level.

However, it anticipates that over the following few years, the central government will gradually reduce its large deficits to roughly 7.3% of GDP by fiscal 2027.

S&P predicted that during the next three years, the aggregate net general government debt will stabilise at just under 85% of GDP, which would be higher than the pre-pandemic level of 75% of GDP but far lower than the pandemic peak of over 90%.