India’s growth trajectory remains intact despite US tariffs: S&P Global Ratings

New Delhi: India’s long-term growth prospects remain intact despite high US tariffs, as the government continues to push economic reforms and raise living standards, S&P Global Ratings said.

Strong economic growth, political will for fiscal consolidation, and a supportive monetary policy framework to control inflation were the main reasons given by the agency for upgrading India’s sovereign credit rating to “BBB” with a stable outlook after an 18-year lapse.

Based on strong domestic demand, S&P predicted that India’s economy would expand at an average rate of 6.8 per cent over the following three years. The agency noted that improvements in infrastructure and connectivity could ease structural bottlenecks and further lift the country’s long-term growth trajectory.

S&P Global Ratings Director YeeFarn Phua noted that over the last three to four years, India’s economy has been among the best in the world and has continuously outperformed its regional counterparts.

In order to maintain growth momentum, he continued, the government’s reform agenda, emphasis on infrastructure, and fiscal consolidation were essential.

S&P Asia Pacific Economist Vishrut Rana said that India’s comparatively low trade dependence acts as a buffer against the effects of recent US tariff hikes.

Earlier this month, citing economic resilience and sustained fiscal consolidation, the global credit ratings agency upgraded India’s long-term unsolicited sovereign credit rating to “BBB” from the earlier “BBB-“, ahead of the 79th Independence Day.

In a note, S&P Global said the stable outlook reflects continued policy stability and high infrastructure investment, which are set to boost India’s long-term growth.

That, along with cautious fiscal and monetary policy that moderates the government’s elevated debt and interest burden, will underpin the rating over the next 24 months, the rating agency said.

Additionally, India’s short-term rating was changed from A-3 to A-2, and the transfer and convertibility evaluation was changed from BBB+ to A-.

S&P changed its rating of the Indian economy from stable to positive in May 2024, stating that it might increase the sovereign rating if India’s fiscal deficit significantly reduces.

Additionally, the agency raised the long-term issuer credit ratings of three non-banking financial companies (NBFCs) and seven Indian banks.

The NBFCs are Bajaj Finance, Tata Capital, and L&T Finance, and the banks are State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Union Bank of India, Indian Bank, and Kotak Mahindra Bank.

IANS