India gets Standard & Poor's boost
Rating agency feels India’s investment outlook is stable
By : DC Correspondent
Update: 2014-09-27 02:33 GMT
Mumbai: Standard & Poor’s Ratings Services revised its outlook on India to stable from negative, based on India’s improved political setting which it said offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management. In a statement, S&P’s said “The stable outlook for the next 24 months reflects our view that the new government has both the willingness and capacity to implement reforms necessary to restore some of India’s lost growth potential, consolidate its fiscal accounts, and permit the Reserve Bank of India to carry out effective monetary policy. It also reflect the country’s strong external profile, combined with its democratic institutions and free press, both of which underpin policy stability and predictability.”
Referring to the constraints on the economy, the agency said “India’s low wealth level, as measured by per capita GDP, is one of the main constraints on the rating. At $1,550, India’s per capita GDP implies a narrow tax and funding base upon which the sovereign can draw to carry a given debt burden, and a lower degree of policy flexibility in the event that dramatic measures are needed to address severe economic stress.”
It projected real per capita GDP growth to reach per cent by next year, and per capita GDP to surpass $2,000 by 2017. The agency concluded by saying “We could raise the rating if the economy reverts to a real per capita GDP trend growth of 5.5 per cent per year and fiscal, external, or inflation metrics improve. Conversely we may lower the rating if the government’s structural reform agenda stalls.”
Madan Sabnavis, chief economist, Care Ratings said he was pleasantly surprised as he was not expecting it and added, “it’s a positive and it shows they are viewing what the government is doing by way of wooing investors, the rupee stability, strong forex reserves, positively.”