Daily Archives: January 3, 2014

S&P : India’s Structural Issues Limit Growth And Effectiveness Of Fiscal Consolidation

India’s slowing economy constrains the sovereign credit quality despite some progress in reforming fuel subsidies and the government’s commitment for fiscal consolidation. Standard & Poor’s Ratings Services believes India’s key rating strengths are a robust participatory democracy of more than 1 billion people and a free press; low external debt and ample foreign exchange reserves; and an increasingly credible monetary policy with a largely freely floating exchange rate. Nevertheless, the country’s significant weaknesses are an onerous burden from its public finance, lack of progress on structural reforms, and shortfalls in basic services typical of a nation with a GDP per capita of US$1,500. We believe our ‘BBB-‘ foreign and local currency long-term sovereign credit ratings on India have more than a one-third chance to be lowered. That’s because India’s growth has been slowing in the past two years and its external debts are rising even though they are low.