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S&P keeps India's rating unchanged at 'BBB-' with stable outlook

Citing low income levels, a sizeable fiscal deficit and high general government debt, global rating agency Standard and Poor's (S&P) has kept its India rating unchanged at the lowest investment grade of 'BBB-', with a stable outlook. It said that stable outlook reflects its view that over the next 2 year India's growth will remain strong, it will maintain its sound external accounts position and added that fiscal deficits will remain broadly in line with their expectations. S&P last upgraded India's sovereign rating to 'BBB-' from 'BB+' in January 2007.

Welcoming government's reforms, including the rollout of GST and a planned $32 billion capital infusion into its struggling state-run lenders, the rating agency clarified that upward pressure on the ratings could build if the government's reforms markedly improve its net general government fiscal deficit and lead to a reduction in the level of net general government debt. It also said that downward pressure on the ratings could emerge if gross domestic product (GDP)  growth disappoints, bringing about a reassessment of the view on trend growth; if net general government deficit rises significantly; or if the political will to maintain India's reform agenda significantly loses momentum.

S&P reiterated its concerns about India's GDP, per capita income, saying it was the lowest of all investment-grade sovereigns that they rate at an estimated $2,000. It projects India's GDP growth to average 7.6% over 2017-2020. It also said ongoing expenditure pressure at both the central government and state levels will ensure fiscal consolidation remains slow. However, it said India's external position is a strength given the rupee's liquidity in international foreign exchange markets.

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