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Inflation | India needs fresh reforms, recovery key to retain rating: S&P

Inflation | India needs fresh reforms, recovery key to retain rating: S&P

New Delhi: International ratings agency S&P Global said India’s recovery from the impact of the Covid-19 outbreak and the lockdown would be key to maintaining its sovereign rating, in a report on Friday. It also said the country will need fresh reforms to arrest weak consumer sentiment and investment.

“The pace and scale of India’s economic recovery will be crucial to the sovereign rating because the high pace of its trend growth has made up for some of its weaker credit metrics,” said Andrew Wood, director of sovereign and international public finance ratings at S&P Global.

The key question is just how deeply the health crisis and government containment measures will affect the economy, the report said, adding that the current fiscal will likely be the fourth successive year of decelerating economic growth.

The latest report followed the global rating agency’s reaffirmation of India’s long term BBB- rating with a stable outlook and short term A-3 rating on Wednesday. Apart from favourable external settings,

India’s healthy demographics and competitive unit labour costs supported its rating and prospects, the report said, adding that the government needs to focus on execution of the economic reforms it announced as a response to the pandemic.

After a likely 5% contraction in the current fiscal, S&P projected a strong rebound to 8.5% growth in FY22 followed by a 6.5-7% medium term trend growth. These figures lend sustainability to India’s credit profile, according to Wood.

“With a recovery of this magnitude, India’s 10-year weighted average real GDP per capita growth will likely stay well above the average of its peers,” the report said.

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