Rains can't batter Kerala's growth! S&P assigns 'BB' rating to state govt

Kerala economy has been hit hard by floods and devastation caused by heavy rains during current monsoon season

Global rating agency Standard and Poor's has assigned long-term rating "BB" to the state of Kerala, first such rating by a rating agency to the state government in India.

The short term rating rating is placed at "B". Outlook is stable for both ratings.

S&P in a statement said ratings on Kerala reflect the Indian state's weak budgetary and debt metrics driven by its large spending on socio-economic welfare to support a low-income economy.

The economy has been been hit hard by floods and devastation caused by heavy rains during current monsoon season.

The state's internal liquidity position is very weak but mitigated by proven access to deep domestic capital markets. The rating on Kerala benefits from a central government framework that has a track record of providing extraordinary support toward debt relief, the agency said.

Kerala's financial management is considered satisfactory on a global comparative basis, and its long-term planning is better than that of most domestic peers.

The stable outlook reflects our view of the state's strong economic growth over the next 12 months and the likeliness of central government support in the case of financial distress.

Kerala's economic growth will remain healthy and produce strong revenue growth over the next 12 months. It will continue to have strong access to capital markets and be able to contain its weak fiscal metrics.

Rating agency expects the central government to provide extraordinary support to Kerala under a financial distress scenario.