Mumbai, March 14: International ratings agency Standard & Poor’s (S&P) has said it will revise India’s outlook to stable from negative if the government adopts measures that will bring down its fiscal deficits and better the country’s growth prospects.
The rating agency’s comments come just days after Moody’s Investors Service indicated that it was no longer looking at a rating downgrade for India.
S&P made these observations in a report on Asia-Pacific Sovereign Ratings. It has assigned a BBB- rating to India, which is the lowest investment grade with a negative outlook. The rating agency added that there would be a downgrade if India’s economic growth prospects dimmed or fiscal reforms slowed.
Market circles said the S&P’s observations was also one of the reasons behind the rally on the bourses today. The BSE Sensex today rose more than 207 points to close at 19570.44 after inflation data raised hopes that the Reserve Bank of India would announce a rate cut next week.
Moody’s had struck an optimistic tone with regard to finance minister P. Chidambaram’s plans to bring down the fiscal deficit next year. Early this month, it said in a special commentary that the Union budget for 2013-14 pursued realistic fiscal consolidation goals.
Chidambaram had in the budget targeted to bring down the fiscal deficit to 4.8 per cent of the gross domestic product (GDP) from 5.2 per cent in the revised estimates for the current fiscal year.
“This plan of modest fiscal consolidation is credit positive for the sovereign because, against a backdrop of subdued GDP growth and upcoming elections, it is a realistic effort to correct India’s macroeconomic imbalances,” Moody’s had said.
Moody’s has assigned a BAA3 rating to India, which is the lowest investment grade with a stable outlook. Fitch is the other ratings agency that has a negative outlook on India.