May 31 (Punjab Khabarnama) : Rating agency S&P said on Friday that it will keep an eye on the new government’s growth-supporting policies as well as fiscal data for the next one or two years before deciding to increase India’s credit rating. S&P Global Ratings this week upgraded India’s economic outlook from ‘stable’ to ‘positive’. But it has retained India’s ‘sovereign rating’ at ‘BBB-‘, which is the lowest investment-worthy rating. Along with this, the rating agency hopes that any new government formed in the country will continue its commitment to growth-supporting policies, investment in infrastructure and fiscal consolidation.
S&P Global Ratings analyst Yifern Phua said in a webinar, “In the next two years, we will watch closely whether the government remains on the path of fiscal consolidation or not. … We will see for the next one or two years what kind of fiscal data comes and if this happens, it will improve the rating.” The fiscal consolidation plan aims to bring down the fiscal deficit, the difference between government expenditure and revenue, to 4.5 per cent of gross domestic product (GDP) by March 2026. The fiscal deficit is estimated to be 5.1 per cent at the end of March 2025.
Phua said once the impact of higher infrastructure investment is felt and bottlenecks are removed, India’s long-term growth potential could be as high as eight per cent. He said India has had consistently high GDP growth rates despite different parties and coalitions ruling since economic liberalisation in 1991. “This reflects a national consensus on key economic policies. We believe this pro-growth policy will continue after the election and the political commitment to fiscal consolidation will also remain in place in the years to come. No matter who is the incoming government, pro-growth policies, continued infrastructure investment and the drive to reduce fiscal deficit will continue in the years to come,” Phua said.
At present, the election process is going on for the formation of the new Lok Sabha. The results of the elections will be declared on June 4. Phua expressed hope that the total government deficit of the Center and the states will come down to 6.8 percent of GDP by the year 2028. At present it is at 7.9 percent. S&P Director (Asia-Pacific, Sovereign Rating) Andrew Wood said that India’s fiscal performance remains relatively weak compared to some emerging markets. The fiscal deficit of BBB-rated countries – Malaysia, Philippines, Indonesia, Thailand, Vietnam will be less than four percent this year, whereas in the case of India it is 7.9 percent.