S&P keeps India's sovereign rating unchanged... 'unfair,' retorts Govt

The rating action was quickly termed by the government as "unfair".

The rating stance taken by S&P Global Ratings comes days after Moody's Investors Service raised India's sovereign rating for the first time in over 13 years on growth prospects boosted by continued economic and institutional reforms.

In a statement, S&P said India's rating reflects its strong GDP growth, sound external profile and improving monetary credibility.

These, it said, are "balanced against vulnerabilities stemming from the country's low per capita income and relatively high general government debt stock."

Sanjeev Sanyal, Principal Economic Adviser, termed the rating unchange as "a bit unfair" saying the low per capita income is "neither a reflection on our ability or our willingness to pay debt."

Economic Affairs Secretary Subhash Chandra Garg said S&P chose to play cautious and hoped that the reforms will reflect in a ratings upgrade next year.

"We are not disappointed but our expectation would be that S&P also takes into account what the government has done," he said adding S&P has said everything that Moody's also stated in its rating upgrade.

S&P has reaffirmed India story, he said. He went on to add that the government will stick to the fiscal consolidation path.

Railways and Coal Minister Piyush Goyal said S&P has been historically more conservative and follows Moody's.

In January 2007, S&P had raised sovereign credit ratings on India to 'BBB-' with a stable outlook, from 'BB+'.

'BBB' rating is a notch above junk status.

"Upward pressure on the ratings could build if the government's reforms markedly improve its net general government fiscal out-turns and so reduce the level of net general government debt," S&P said on Friday.

The upward pressure could also build if India's external accounts strengthen significantly.

On the other side, a disappointing GDP growth, rise in government deficit or political will to maintain reform agenda losing momentum will create downward pressure on the ratings.

It said one-off factors like demonetisation and the imposition of a goods and services tax (GST) had led to some quarterly cooling in India's high growth figures but the medium-term outlook for growth remains favourable.

The growth outlook is supported by rising private consumption, an ambitious public infrastructure investment programme and a bank restructuring plan that should help revive investment.

When Moody's on November 17 upgraded India's sovereign rating to Baa2 -- the highest since 1988, the government was quick to seize the moment to state that the move was "belated recognition" of reforms undertaken.

That rating upgrade was the first since January 2004, putting India in the league of the Philippines and Italy.

New Delhi: Railways Minister Piyush Goyal on Friday said that Standard & Poor's (S&P) is a conservative agency and its decision to retain India's rating with stable outlook is a "huge endorsement" of the policies of the Modi government.

"We are extremely happy that S&P has continued to affirm 'BBB-minus' with a long term sovereign rating with stable outlook," Goyal told reporters here.

The rating agency is known worldwide to be a far more conservative when compared with Moody's or Fitch, he added.

"The fact that they have continued to give stable rating but in the text have given so much praise for the policies of the government and for PM Modi's bold reform initiatives is a a huge endorsement for the work which this government has done," Goyal said.

"S&P usually has a time lag and in that circumstance to get the kind of favourable comments that S&P has given in its report is an affirmation of the policies of the PM Modi's government being recognised worldwide," Goyal noted.

The report has spoken at length that growth will continue to remain strong, they have recognised that the quarterly slowdown in the GDP growth is a temporary phenomena largely due the the implementation of GST which has been praised at length in the report, he added.

"They (S&P) have also reflected confidence that India's external position will continue to remain strong and fiscal deficit will remain in line with the expectations," Goyal said.