InvestorQ : I just read that S&P will not downgrade India for next 2 years, is that correct?
Riya Dwivedi made post

I just read that S&P will not downgrade India for next 2 years, is that correct?

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shrinidhi Rajan answered.
1 month ago
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You really should not interpret it that way. S&P Global Ratings has said that India's credit rating would be retained at the current level of “BBB-“ for the next two years. S&P projects 9.8% GDP growth in FY22 on a base case basis and a worst case scenario of 8.2% GDP growth. Even at 8.2%, S&P has said it was safe to hold the ratings. However, S&P has kept the window for downgrade open in the case of huge disruption by resurgence of COVID.

The Global Ratings Director of S&P Global Ratings, Andrew Wood, has clarified that the moderate downside scenario in GDP growth would not negatively impact the government's fiscal position. However, there could be the risk of spike in fiscal deficit in the year to above 11% if the revenues don’t gather pace. In a normal range scenario, S&P does not expect any change in the rating level over the next 2 years.

In the previous year, S&P pegged India's rating at the lowest investment grade “BBB-“ with a stable outlook. The current rating bracket is just one notch above the speculative grade and that is what the government and the finance ministry need to be careful about. Fitch has also maintained the sovereign at the same level but has also kept its negative outlook. The sustainability of the fiscal positions remains the major risk.

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