India's Economic Outlook Promising, Fiscal Deficit Key To Rating: S&P Global

New Delhi, Aug 7 (KNN) S&P Global Ratings has highlighted India's strong economic position among South Asian countries, citing robust growth prospects and a favourable external balance.

According to Andrew Wood, S&P Director of Sovereign and International Public Finance Ratings for Asia-Pacific, India's economic trajectory remains promising despite global economic challenges.

Speaking at an Asia-Pacific webinar on Tuesday, Wood emphasized that India's status as a net external creditor economy is a crucial factor supporting its investment-grade rating.

He indicated that a potential rating upgrade could occur if India's fiscal deficit narrows significantly, with the change in net general government deficit falling below 7 per cent of GDP on a structural basis.

The Indian government's recent budget for 2024-25 targets a central government fiscal deficit of 4.9 per cent of GDP, an improvement from the previous 5.1 per cent target.

However, Wood noted that when combined with local government deficits, the general government deficit is likely to remain above 7% of GDP for the current fiscal year.

In May, S&P Global Ratings had revised India's sovereign rating outlook to positive from stable, citing strong growth prospects for the next three years and increased public spending.

The agency maintained India's sovereign rating at 'BBB-', the lowest investment grade, while expressing optimism for a potential upgrade within two years, contingent on continued reforms and fiscal discipline.

Wood stressed that the trajectory of India's fiscal metrics over the coming years will be crucial in determining the direction of its ratings.

The rating agency anticipates continuity in economic reforms and fiscal policies, regardless of election outcomes.

As global economic conditions remain challenging, India's economic performance and fiscal management will be closely monitored by international rating agencies and investors alike.

(KNN Bureau)