New govt's policy steps to decide credit ratings: S&P

The direction and pace of policy reforms of the government to be formed in May after the ongoing general elections will determine the credit rating of India, global rating agency Standard & Poor's (S&P) said on Tuesday. "The direction and pace of policy reforms, more than which political party takes control, can affect the ratings on the sovereign," the rating agency.

At present, the rating of India is investment grade 'BBB-' with negative outlook. The outcome of India's general election can provide an insight into the political stability, ability, and willingness of the new government to implement reforms for boosting economic growth, it said.

The results of general elections would be announced on May 16. To claim the right to form a new government, a single political party or a coalition of political parties require 272 of 543 elected Lok Sabha seats. "We believe the current political landscape in India suggests no single party could win an outright majority," said S&P sovereign credit analyst Kim Eng Tan.

An important factor is how fragmented the government will be, it said, adding, the more parties involved in the next coalition government, the more likely policies will be incoherent and less supportive of credit attributes.

"If we revise our sovereign outlook to stable, those negative outlooks on banks and corporate entities, which reflect the sovereign outlook, could also be revised to stable," it said.