S&P retains India's rating at BBB, Centre says report 'very satisfying'

New Delhi: With the global financial services company, Standard & Poor's (S&P) retaining its outlook on India as stable, the Centre on Friday said that its report was 'very satisfying' and it indicated that the country's economy was moving in the right direction.

"All in all it is a very satisfying report. It shows that economy is strong and is improving further. And as per their projection pace of development, it will accelerate further in 2018-20. The stable outlook reflects our view that over the next two years, the growth will remain strong. India will maintain its sound external accounts position and fiscal deficits will remain broadly in line with our expectations," Union Railways and Coal Minister Piyush Goyal said.

Earlier in the day, the Standard & Poor's (S&P) had retained its outlook on India as stable and kept the rating unchanged at BBB minus.

"We are extremely happy that the S&P has continued to affirm 'BBB minus' with a long-term sovereign rating with a stable outlook. All economists and readers of the economy are aware that usually S&P responds much slower than Moody's and Fitch. Traditionally, it has been seen that Moody's is first of the block then Fitch follows and after that the S&P has a time lag," Goyal added.

While the agency retained its rating on India, it also lauded the Modi-led government's fiscal consolidation drive under which multiple reforms were taken towards the path of a favourable economy.

"In some sense, they gauged the mood of India. They have suggested that despite hurdles coming in the Upper House, the Modi Government has been successful in making transformational changes possible in India. They have also praised India for having strong democratic institutions including the press. Ratings on India reflect the country's strong Gross Domestic Product (GDP) growth, sound external profile and improving monetary credibility," he added.

The Union Minister further said India's strong democratic institutions and its free press promote policy stability and compromise underpinned the ratings.

Meanwhile, Union Defence Minister Nirmala Sitharaman today extolled the Indian economy and termed it to be strong and moving forward besides having the potential of growing at a very high rate.

"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 and has the potential of growing at a very high rate," the Defence Minister said in a statement.

"S&P Global has lauded the Narendra Modi government for passing a number of reforms that address long-standing impediments to the country's growth, whilst affirming India's existing rating at BBB-/A-3," Sitharaman said.

The statement further reads that the report has also appreciated India's efforts in improving monetary credibility and has noted the presence of strong democratic institutions and free press.

"The report has underlined that India's government revenue as a percentage of Gross Domestic Product (GDP) is low. It further asserts that effort of the government to expand the tax base by demonetisation has increased the number of tax registrants and that introduction of Goods and Service Tax (GST) will further accelerate government revenue," it added.

Sitharaman also said that reforms such as demonetisation and the GST may have led to some quarterly cooling but the medium-term outlook for growth in India is favourable.

"Reforms such as demonetisation and the GST may have led to some quarterly cooling but the medium-term outlook for growth in India is favourable. This is based upon private consumption, ambitious public infrastructure investment program and a bank restructuring plan that will help investments," she said.

She also said, "S&P has hence inferred that over the next two years, growth in India will remain strong and India will maintain its sound external accounts position."

In her concluding statement, she said, "After World bank's recognition of India's reforms in improving ease of doing business and Moody's upgradation for India's sovereign credit ratings. S&P too has recognised the strides the Indian economy has made under the leadership of Prime Minister Modi."

The rating stance taken by S&P Global Ratings comes days after Moody's Investors Service raised India's sovereign rating for the first time in over 13 years on growth prospects boosted by continued economic and institutional reforms.

The growth outlook is supported by rising private consumption, an ambitious public infrastructure investment programme and a bank restructuring plan that should help revive investment. 

With ANI inputs