Improvement in India’s ratings: S&P Global enhances ‘BBB’ to ‘BBB’, increase in trust of investors. S and P Global Rating India Upgrade What is Credit Rating How it Impact Economy

by

S&P Global Rating up upgraded India’s credit rating to ‘BBB’ to ‘BBB’. Know what will be the impact on investors, rupees and government debt and for what reasons it improved.

S & p global ratings: India has received a big gift from global finance. S&P Global Ratings has increased India’s long-term sovereign credit rating from ‘BBB-‘ to ‘BBB’ while Outlook has been kept ‘Stable Outlook’. Also, short-term rating has also increased to ‘A-3’. This means that India has now become a safe investment destination in the eyes of global investors.

Understand credit ratings like this

Credit rating is the economic report card of a country. Just as banks see your credit score before giving loans, similarly global investors see its credit rating before investing in a country.

  • Aaa: Most reliable, extremely safe
  • A to Aa: Strong and stable
  • Bbb: Safe, but with some challenges
  • Bb or down: Risky, called junk
  • ‘BBB-‘ to ‘BBBThe jump of ‘means that India has now climbed up further in the safe category, that is, the trust of investors has increased.

Why did S&P increase India’s rating?

Rapid economic development: India’s average GDP growth between FY22 to FY24 was 8.8%, the fastest in Asia-Pacific. It is estimated to be around 6.8% in the next three years.

Stable policies: Financial discipline, inflation control and frequent improvement (reforms) gave investors confident.

Infrastructure Boom: Large investment on roads, rail and capital projects is now about 5.5% of GDP.

Better Financial Status: Budget deficit is still high, but there is a possibility of decrease in the coming years.

What does this upgrade mean for India?

  • Foreign investors will increase confidence, it will increase in FDI and FPI.
  • The Government of India can get cheap loans in the global market.
  • Rupee can get stability and strength.

Challenges are still left

S&P has warned that government debt and financial deficit is still high. Also, per capita income is lower than other emerging economies. If the economic growth rate slows down or the financial discipline is impaired, then there may be pressure on the rating.

Leave a Comment