Why global agencies are upgrading India
The S & P move came after a gap of nearly 19 years, and was aptly timed for the country which is witnessing relative weakness in its capital account and is subject to a punitive 50% additional tariffs on its goods in the US, besides a reciprocal levy of equal magnitude. S&P attributed the rating upgrade to economic expansion and sound fundamentals that would underpin growth momentum over the next two to three years, besides the high priority being given to fiscal consolidation.
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As per a review published on Friday, R&I too recognised the progress in fiscal consolidation by the government, driven by buoyant tax revenues and rationalisation of subsidies, and a manageable level of debt, along with high growth. It also noted India’s strengthened external stability, reflected in modest current account deficit, stable surpluses in services and remittances, low external debt-to-GDP ratio, and sufficient forex cover.
Global vote of confidence amidst headwinds
In a statement, the Finance Ministry welcomed the rating upgrade by R&I, and said the government remains committed to building on this momentum through policies that promote inclusive, high-quality growth alongside fiscal prudence and macroeconomic stability.
Three credit rating upgrades for India in five months reflect increasing global recognition for India’s robust and resilient macroeconomic fundamentals and prudent fiscal management, and underscore global confidence in India’s medium-term growth prospects amid prevailing global uncertainties, the ministry added.
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Anish Shah, group CEO and MD, Mahindra Group said: “The recognition by R&I, following S&P and Morningstar DBRS earlier this year, reaffirms that India’s robust macroeconomic fundamentals, prudent fiscal management, and sustained reforms are being acknowledged globally. It also underscores the confidence the world places in India’s ability to deliver inclusive and sustained growth, even amid global uncertainties.”