India’s Fiscal, Economic Reforms to Determine Credit Rating: S&P

The fiscal and economic reforms taken by India’s new government in the next two to three months will have “significant implications” on India’s sovereign credit rating, Standard & Poor’s Ratings Services said on Friday.

S&P added the next government would need to regain “fiscal prudence in a sustainable way,” such as by implementing a goods and services tax to help stabilise government revenues.

“What the next government says and does in the coming months is crucial to boosting confidence in the policy settings and the economy,” S&P credit analyst Takahira Ogawa was quoted as saying in the statement.

“If confidence rises, investment and consumption in India could strengthen, after being held back by the uncertainty surrounding the election.”

The S&P statement came after the Bharatiya Janata Party and its allies headed for the biggest victory the country has seen in 30 years.

S&P is the only of the three major credit agencies to have India with a “negative outlook” for its “BBB-minus” rating, meaning any downgrade would send the country to below investment grade.