The Standard & Poor’s logo is displayed at the company’s headquarters in New York, U.S. (Photographer: Scott Eells/Bloomberg) 

India Pitches For Rating Upgrade With S&P, Cites Macro Stability

India pitched for ratings upgrade with S&P as the U.S.-based agency discussed the macro-economic situation with the Finance Ministry in Delhi against the backdrop of a depreciating rupee and widening current account deficit, according to an official.

Rising oil prices, their impact on government finances and increasing Goods and Services Tax collections figured in the discussions between the Finance Ministry officials, led by Economic Affairs Secretary Subhash Chandra Garg, and representatives of the global credit ratings firm.

We have asked S&P for a rating upgrade citing the country’s macro-economic stability, the official said. The officials explained to S&P that debt-to-gross domestic product ratio is a long-term consideration and should not be immediate concern for rating upgrade, he said.

Credit rating agencies have been raising the red flag over India’s high debt-to-GDP ratio, which stands at around 68.5 percent. The Fiscal Responsibility and Budget Management committee headed by former Revenue Secretary NK Singh had suggested that the centre and states' combined debt-to-GDP ratio be reduced to 60 percent by 2023. India's position regarding rupee and current account deficit, too, was explained to S&P, the official said.

The rupee closed at a record low of 70.74 against the US dollar today. A depreciating rupee puts pressure on the current account deficit—the difference between inflow and outflow of foreign exchange.

The government has budgeted fiscal deficit to be at 3.3 percent of GDP in the current fiscal. Fiscal deficit during April-June quarter had touched 68.7 percent of budget estimates.

Another U.S.-based rating agency Moody's Investors Service had yesterday said there are risks to the fiscal deficit breaching the 3.3 percent budgeted for current fiscal as higher oil prices will add to short-term pressures.

Moody's also expects the current account deficit to widen to 2.5 percent of GDP in the fiscal year ended March 2019, from 1.5 percent in the previous fiscal.

In November last year, S&P had ruled out upgrade in India's sovereign rating through 2017, saying it wants to see more efforts to lower government debt to below 60 percent of GDP and that it did not expect revenues to rise enough to meaningfully lower the deficit over the medium term.

It maintained the lowest investment grade rating of BBB- with a stable outlook.

Another global agency, Fitch, had in April, 2018, retained India's sovereign rating at 'BBB-' with 'stable' outlook, saying that the country's medium-term growth potential is strong.