S&P Global Warns India-Pakistan Tensions Pose Credit Risks To Both Nations

New Delhi, May 8 (KNN) S&P Global Ratings warned that ongoing hostilities between India and Pakistan have heightened credit risks for both countries, though no immediate impact on sovereign credit ratings is expected.

The rating agency, which assigns India a 'BBB-' rating with positive outlook and Pakistan a 'CCC+' with stable outlook, anticipates tensions will remain elevated over the next two to three weeks with the possibility of significant further military actions from both sides.

"The outbreak of hostilities between India and Pakistan has increased regional credit risks, especially for the two sovereigns involved. Our base case is for the intense military actions to be temporary, which will give way to a longer period of contained and sporadic confrontations," S&P stated in its assessment of the situation.

The agency expects India to maintain strong economic growth allowing for gradual fiscal improvements, while anticipating Pakistan's government will remain focused on supporting economic recovery and fiscal stability.

S&P emphasized that neither country has incentive to allow current tensions to become prolonged.

Last week, S&P reduced India's FY26 growth forecast from 6.5 percent to 6.3 percent, citing uncertainty surrounding US trade policy.

The agency cautioned that a protracted military conflict would jeopardize Pakistan's improving external and fiscal metrics needed for macroeconomic stability, while India would face challenges attracting foreign investors seeking to reconfigure international production amid global economic uncertainty.

Earlier this week, Moody's Ratings projected India's growth at 6.3 percent for the current fiscal year, noting that geopolitical tensions between India and Pakistan represent a potential downside risk to baseline growth forecasts.

Moody's added, "Costs to investors and businesses are likely to rise as they factor for new geopolitical configurations when deciding where to invest, expand and/or source goods."

(KNN Bureau)