MUMBAI (Reuters) – S&P Global Ratings mentioned on Friday its outlook on India`s sovereign debt remained steady, though surging COVID-19 cases might threaten the robust financial recovery it has seen up to now.
The ranking company, nevertheless, mentioned the second wave mustn’t hit the financial system as arduous as the primary wave did within the April-June quarter of the 2020/21.
“India`s second COVID wave may derail a strong recovery in the economy and credit conditions,” S&P mentioned.
“Our downside scenarios suggest a less robust recovery in government revenues, and the severe downside scenario may entail additional fiscal spending,” they added.
The company, nevertheless, mentioned it nonetheless expects the financial system to develop for the 12 months as an entire, though it mentioned there are draw back dangers to its present baseline projection of 11% progress.
It expects progress to fall to 9.8% beneath its reasonable state of affairs and to eight.2% beneath the extreme state of affairs primarily based on when the present an infection wave peaks.
“Our outlook on India`s sovereign rating remains stable which suggests that we do not expect there to be change in the rating level over the next two years. Currently that does remain the case,” mentioned Andrew Wood, director, sovereign & worldwide public finance ratings.
“Of course there are going to be at the very least some near-term ramifications on India`s economy stemming from the severe second wave of COVID-19 and that may feed through into the sovereign credit metrics,” he added.
S&P has a “BBB-” ranking on India, its lowest funding grade, with a gradual outlook.
S&P mentioned the tempo of recovery in India after the present COVID-19 peak has handed and the federal government`s fiscal place shall be essential in figuring out the nation`s sovereign credit standing going forward.
“If it (fiscal position) becomes acute enough and on a more sustained basis, then we could have more concerns regarding sustainability of the public finance situation,” Wood mentioned.
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