S&P hails India's improved monetary credibility

India’s external position and institutional strengths were seen underpinning the country’s credit worthiness in the short-term, but its historical weaknesses would act as an impediment to any improvement, analysts at Standard&Poor’s said.

In a statement issued on Monday, the ratings agency reaffirmed its ‘BBB-‘ rating on the South Asian country’s long-term sovereign debt, the lowest investment grade mark available.

The outlook for that rating was kept at ‘stable’, meaning it was unlikely to either improve or deteriorate over the following two years.

The nation’s “limited reliance” on external savings to fund its growth served to compensate for India’s elevated debt load and historically high general deficits, despite which New Delhi continues to face shortfalls in basic services and infrastructure, S&P added.

A low level of GDP per capita is the other major vulnerability identified by the ratings agency.

S&P also highlighted the “improved monetary credibility” and political progress on several fronts, including: strengthening the business climate, improving labour market flexibility and reforming the energy sector.