S&P upgrade would boost investment inflow: PMEAC

The Prime Minister's advisory panel today said global rating agency S&P's decision to revise upwards the country's rating outlook to stable from negative would make help boost investment inflows, while Citi saw a possibility of better grades in future.

Prime Minster's Economic Advisory Council Chairman C Rangarajan today said improvement in the outlook assigned by Standard & Poor's will make the country a better investment destination.

"What it (the S&P rating revision) does...It basically makes the country a better destination for investments," Rangarajan told mediapersons on the sidelines a Skoch seminar.

Earlier in the day, S&P revised the country's rating outlook to "stable" from "negative," which means that earlier fears of downgrade of the country's ratings no longer exist.

"But I would also say that investors make their own judgement. In fact, the capital inflow has been strong they have not been affected by what rating agencies have said," the former RBI governor said, adding, however, if the rating agencies also give a good report, then it helps in better capital inflow.

Talking about the rationale behind this upgradation, Rangarajan said the budget has given clear indication that the government is serious on fiscal consolidation. There is substantial reduction in fiscal deficit for the next year, from the current fiscal. Therefore, definite signals have been sent out regarding fiscal consolidation, Rangarajan added.

"We believe the S&P move is encouraging and bodes well for the rupee as well as FII inflows. We expect further rating action, given positive steps toward fiscal consolidation, the likelihood of implementation of GST later this year and India's favorable growth and external sector dynamics," Citi said in a research note.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said: "Obviously, the S&P move is a good thing."

Sovereign rating is a tool to measure the risk level of a country's investment environment and indicates the ability of a country to repay its debts, foreign or domestic.