10 key things S&P said about Indian economy
S&P Global Ratings on Wednesday has retained India's ratings at 'BBB-' with a stable outlook and ruled out any upgrade in two years citing weak pubic finances.
"We are affirming our 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India," S&P Global Ratings said in a statement.
"The stable outlook balances India's sound external position and inclusive policymaking tradition against the vulnerabilities stemming from its low per capita income and weak public finances. The outlook indicates that we do not expect to change our rating on India this year or next, based on our current set of forecasts," it further added.
According to the ratings agency, the ratings on India reflect the country's sound external profile and improved monetary credibility.
Here are 10 key things that S&P Global Ratings said about Indian economy in its latest report:
1. Improvements in policymaking continue to strengthen the prospects for India's economic and fiscal performance. Wide fiscal deficits, a heavy debt burden, and low per capita income nonetheless detract from the sovereign's credit profile.
2. India's external position remains a credit strength. The country has a floating exchange rate and limited reliance on external savings to fund its growth.
3. While India experiences modest volatility in terms of trade, we expect it to record a moderate current account deficit (CAD) of 1.4% in 2016 (2.1% in 2015), and to average similar levels through 2018.
4. We forecast that India's external debt net of public and financial sector external assets will average only 5% of current account receipts over 2016-2018 (our forecasts reflect the adoption of the sixth edition of the IMF's Balance of Payments and International Investment Position Manual).
5. Although we expect some decline in India's external liquidity metrics in the next three years as its banks increasingly turn to external financing, we project that India's gross external financing needs will remain below its current account receipts plus usable reserves through 2018.
6. India's general government revenue, at an estimated 21% of 2016 gross domestic product (GDP), is low among rated sovereigns.
7. We expect India's gross domesitc product (GDP) growth of 7.9% in 2016 (6.6% in per capita GDP) and 8% on average over 2016-2018 (6.7% in per capita GDP).
8. We believe domestic supply-side factors will increasingly bind economic performance, and the government has little ability to undertake countercyclical fiscal policy given its current debt burden.
9. India's high fiscal deficits have led to the accumulation of sizable general government borrowings (about 69% of GDP, net of liquid assets) and debt servicing costs (over a quarter of general government revenue). We project net general government debt to decline only modestly over our forecast horizon.
10. India has a long history of high general government fiscal deficits (averaging 8.8% of GDP over the past 20 years and 7% in the past five years). The deficits have not closed India's sizable shortfalls in basic services and infrastructure.