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S & P Gives Stable Credit Rating to India
Sep 29, 2014

In a major boost to Indian economy, the credit rating agency Standard & Poor's raised India's credit rating outlook to stable on the back of strong political mandate helping fiscal and economic reforms. S&P, after a gap of two years, has improved India's sovereign credit rating outlook from negative to stable indicating the possibility of a rating upgrade. This reflects India has started treading its path of recovery.

The upgrade signals a greater margin of safety on creditworthiness and thus improves India’s attractiveness as an investment destination to foreign investors. The benefits further extend to Indian companies as overseas borrowing rates come down. The stable outlook augurs well for the rupee that has weakened in the past week. 

The S&P cited two reasons for the change in outlook. First, a stronger political mandate improves the government’s ability to implement reforms, spur growth and improve its fiscal performance. Then, India’s external account has improved. 

With the S&P upgrade, all three major global credit agencies have now placed India’s sovereign rating at the lowest investment grade but with a stable outlook. S&P cut India’s rating to BBB-minus in April 2012. 

All eyes are now on a ratings upgrade, which, S&P said, would be contingent on per-capita gross domestic product trend growth rising to 5.5 per cent annually. This translates into a GDP growth rate of 6.5 per cent to 7 per cent. S&P cautioned, a failure to implement reforms or deterioration in the fiscal or the external situation could trigger a rating downgrade. 


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