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.
