Standard & Poor’s Upgrades India’s Credit Rating

Thursday, February 01, 2007

A recognition of India’s sound economic policies and financial
stability came from the ‘investment grade’ rating conferred on it
by Standard and Poor’s,
the world’s leading provider of independent credit ratings.

S&P raised the country’s level from sovereign credit
rating in an official statement issued on Tuesday, 30th January,
2007. India now stands at ‘BBB-A-3’, the best in the last 10 years.
A sound balance sheet coupled with good economic prospects and a
vast capital market helped the country achieve this high rating.

Finance ministry officials welcomed the upgrade while S&P’s
credit analyst Ping Chew said India’s consistent economic performance
and supportive policies taken by the government towards NRI
investment have contributed to this up scaling. Moreover,
the country’s prospects indicate a steady growth rate of 7.5% in
the medium term.

The happy position that the country’s foreign exchange reserves
are currently enjoying and the wise debt-control which has provided
for any fluctuations that may occur are reflected in the strong
external balance sheet. The current account deficits were overshadowed
by these strengths. S&P has appreciated the country’s
stable bond market which funds the government’s deficits.

In its review, S&P observed that the Central Government’s budget
deficit for 2006-2007 was performing as scheduled, and moving towards
achieving a target of 3.8 % of the Gross Domestic Product
(GDP) because of high revenue collection. Besides, tax reforms and
better administrative and fiscal measures have brought down the
general deficit. However, India could do better in managing its
financial profile, particularly its high debts and deficit.

Will India be able to retain this level or upgrade further on the
scale? It would all depend on the government’s monetary policy on
minimizing debts and the interest burden, and introducing more reforms
towards growth.

Photo: Hyderabad Street Garbage collection 2005 by melgupta, licensed under CC BY-SA 2.0, via Wikimedia Commons.