Rating Unchanged But S&P Lauds India’s Reforms On Infrastructure, Bank Recapitalisation And GST

Rating Unchanged But S&P Lauds India’s Reforms On Infrastructure, Bank Recapitalisation And GST

Anupama Airy

Unfazed by the Moody’s recent upgrade of India’s sovereign rating, Standard & Poor’s (S&P) on Friday kept its sovereign rating for India unchanged at ‘BBB-minus’ while keeping its outlook for the nation stable. BBB’ rating is a notch above junk status.

The New York based credit rating agency, S&P, however, lauded a host of administrations efforts surrounding India’s infrastructure development, its biggest tax reform – Goods and Service Tax (GST) for simplifying indirect taxes as also PSU bank recapitalisation plan.

Infrastructure: As part of country’s biggest highway development plan Bharatmala, the government in October approved the Phase 1 of project to develop and expand approximately 40,000 km of roads at an investment of Rs 3.5 lakh crore by 2022.

“Public-sector-led infrastructure investment, notably in the road sector, will also stimulate economic activity, while private consumption will remain robust,” S&P observed in the report.

PSU Bank Recapitalisation: The global rating agency also appreciated the government’s program of Rs 2.11 lakh crore to recapitalise the stressed public sector banks last month and noted that the move will help to revive growth.

“The medium-term outlook for growth remains favorable, based on private consumption, an ambitious public infrastructure investment program, and a bank restructuring plan that should help revive investment,” said S&P.
“We anticipate that growth will be supported by the planned recapitalization of state-owned banks, which is likely to spur on new lending within the economy, it added.

GST: The Modi government’s GST initiative was also lauded by S&P. “The removal of barriers to domestic trade tied to the imposition of GST should also support GDP growth,” it said.

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In a statement on Friday, S&P said India’s rating reflects its strong GDP growth, sound external profile and improving monetary credibility.

These, it said, are “balanced against vulnerabilities stemming from the country’s low per capita income and relatively high general government debt stock.”


Union Railways Minister Piyush Goyal called S&P report was an affirmation of policies by Prime Minister Narendra Modi. “It’s an affirmation of the policies of the government being recognised worldwide. S&P has given an overall positive outlook with much praise for Modi govt’s initiative.”

Lauding the report by S&P, Defence Minister Nirmala Sitharaman said, “Whether it’s World Bank rankings on ease of doing business, Moody’s rating or S&P now, it is clearly indicating that the Indian economy is strong, moving forward & has the potential for growing at a very high rate.”

Subhash Chandra Garg, Department of Economic Affairs Secretary, said S&P chose to play cautious and expressed hope that India’s rating would be upgraded next year.

Sanjeev Sanyal, principal economic adviser, termed the rating unchange as “a bit unfair” saying the low per capita income is “neither a reflection on our ability or our willingness to pay debt.”

Anupama Airy
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Anupama Airy

Founder and Editor at EnergyInfraPost
Independent Journalist and Energy Expert.​ (Worked with leading mainline financial and national daily for 23 years.​)​ Also, Guest Contributor with busines​sinsider.in
Currently, Writing a Book for Penguin India Titled Greased Pole:How Politics and Lobbying Stifled India's Energy Dreams. The author can be reached on anupama.airy@gmail.com (9810661825)​
Anupama Airy
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