FinMin pitches for a rating upgrade from S&P; cites macro fundamentals

The Union finance ministry, on Thursday, met representatives from global ratings agency Standard & Poor's (S&P) and pitched for a rating upgrade, citing macroeconomic fundamentals, the reforms carried out by the government, and its commitment to meet the fiscal deficit and current account deficit (CAD) targets.

This comes at a time when there is pressure on CAD because of a depreciating rupee and high global crude oil prices, and on fiscal deficit because of concerns over the goods and services tax (GST), and non-tax revenue.

These issues figured during the discussion between the finance ministry officials, led by Economic Affairs Secretary Subhash Garg, and representatives from S&P.

"We have asked S&P for a rating upgrade citing macroeconomic stability of the country," an official said. Officials explained to S&P that the debt-to-gross domestic product (GDP) ratio is a long-term consideration and should not be an immediate concern for a ratings upgrade.

International rating agencies have been raising a red flag over the high debt-to-GDP ratio of India. Currently, the ratio stands at around 68.5.

In November last year, S&P had ruled out any upgrade to India's sovereign rating through 2017, saying it wants to see more efforts to lower government debt to below 60 per cent 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.

S&P has maintained that rating on India for over 11 years. Of the big three rating agencies, only Moody's has been optimistic on India, Asia's third-largest economy. It upgraded its rating in November to ‘Baa3’ from ‘Ba1’.

New Delhi has argued that the rating agencies metrics on India ignores the macroeconomic stability in the last four years, reforms such as the Insolvency and Bankruptcy Code, Monetary Policy Committee, GST, prudent fiscal policy and an environment of high growth with low inflation. But agencies S&P and Fitch have said that India's debt-to-GDP ratio is much higher than similarly-rated peers.