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All is well: S&P lifts mood amid economic gloom; here’s what it says about India’s growth recovery

FE Online
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S&P on Thursday affirmed India’s rating at BBB-/A-3, while keeping the outlook stable, global news agency Reuters reported. The global rating agency also said that India’s structural growth outperformance remains intact. "India’s stable outlook reflects the view that India’s growth will stabilize and begin to recover from its current low ebb," S&P said. The rating agency, however, pointed out that India’s fiscal position remains precarious, with elevated fiscal deficits and net government indebtedness. The fiscal deficits of India is expected to remain broadly in line with our forecasts over the next two years, the agency added. The RBI projected GDP growth for 2020-21 at 6 per cent. Real GDP growth for 2019-20 was projected at 5 per cent in the December 2019 policy. According to the latest Economic Survey survey, the GDP growth during FY21 was expected at 6-6.5 per cent. The first GDP advance estimates by the government pegged the economy to grow at 5 per cent in fiscal year 2019-20.

S&P also said the Indian economy is expected to continue to outperform its peers at a similar level of income, despite the GDP growth seeing a slowdown recently. The agency also said that the latest ratings reflect India’s above-average real GDP growth, sound external profile and evolving monetary settings. The economy is seeing a cyclical rather than a structural slowdown.

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Meanwhile, the Indian economy is seeing a slowdown for some time now on account of both global and domestic factors. Finance Minister Nirmala Sitharaman announced a slew of fresh measures in budget 2020. Even earlier, Nirmala Sitharaman has come out with measures to kickstart the slowing economy including easing credit disbursal to people.