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S&P revises India outlook to 'stable'

NEW DELHI, September 27, 2014

India regained its "stable" rating from Standard and Poor's yesterday, more than two years after an embarrassing downgrade, in a validation of Prime Minister Narendra Modi's ambitious agenda of economic and fiscal reforms.

S&P had cut India's "BBB-minus" rating to "negative" in April 2012, leaving it on the verge of a "junk" rating. That came to symbolise plummeting investor confidence because of corruption cases and a perception of the political paralysis of the then Congress-led government.

But foreign investor confidence has returned after Modi was elected in May, pledging to revive investments and boost growth.

Shares have surged to record highs this year and bonds have also rallied, in a remarkable comeback from last year, when India suffered its worst market turmoil since a 1991 balance of payment crisis - all based on the promise held by Modi's agenda.

The S&P upgrade is likely to buy Modi some more time to deliver on these sky-high expectations, as the credit agency urged the government to resolve growth impediments such as bottlenecks on energy supply.

"Our outlook revision indicates that we believe the current government's strong mandate will enable it to implement many of its administrative, fiscal and economic reforms," S&P said in its statement.

India is now rated at the lowest investment grade with a "stable" outlook by all three major global credit agencies, in line with fellow BRICS countries Brazil and South Africa.

S&P cited India's external position and its improving current account balance as other positive factors.

But key constraints include India's "low wealth level" as well as its "weak public finances," the credit agency noted. S&P also warned it could lower India's rating should the reform agenda stall over the next 24 months.-Reuters




Tags: India | Outlook | S&P | Modi |

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