S&P Global sees no risk to India’s rating from high USD prices


High commodity prices and a stronger US dollar do not pose a risk to India’s credit rating as the country is in a position of strength, said rating agency S&P Global, which cited India’s high debt stock and interest burden. “However, India would face more difficulty in sustaining its weak debt and fiscal positions if the economy slows materially,” it said.

The projected fast economic growth will, however, stave off a further deterioration. S&P has a BBB (minus) rating with a stable outlook for India.

High commodity prices and a stronger US dollar do not pose a risk to India’s credit rating as the country is in a position of strength, said rating agency S&P Global, which cited India’s high debt stock and interest burden. “However, India would face more difficulty in sustaining its weak debt and fiscal positions if the economy slows materially,” it said.

India’s domestic demand recovery is supporting growth, S&P sovereign and international public finance ratings director Andrew Wood told the India Spotlight 2022 webinar recently.

Though private consumption has been slow to recover, activity picked up over April-June. Services activity momentum weakened in July, he said.

“Emerging markets are facing broad-based external pressures from higher commodity prices, US dollar dominance, and tightening financial conditions. India is no exception, with hallmarks of these factors including a higher current account deficit and higher domestic inflation rates. However, India is facing these trends from a position of relative strength,” he was quoted as saying by Indian media reports.

The ratings agency expects India’s gross domestic product (GDP) growth rate to slow to 6.5 per cent in fiscal 2023-24 (FY24) from its projected growth of 7.3 per cent for FY23. Growth is expected to pick up again to 6.7 per cent in FY25. The economy saw a growth of 8.7 per cent in FY22.

Inflation will be a prime concern for the current fiscal, S&P Global ratings economist for Asia-Pacific Vishrut Rana said. “We expect a 6.8 per cent inflation rate this year with risk to upside,” said Rana, adding that it expects the Reserve Bank of India (RBI) to raise interest rates to 5.65 per cent to rein in inflationary pressures.

S&P Global, however, does not see inflation coming within the 4 per cent level even by FY25. It expects it to ease to 5 per cent in FY24 and slow further to 4.5 per cent in FY25.

Fibre2Fashion News Desk (DS)




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