Standard and Poor's Jan. 30 hiked India's credit rating to investment grade, a move that paves the way for global funds prohibited from buying debt labeled as junk to invest in government bonds and other debt in the country.
The last time the country had a stable investment grade rating was in September 1990, about a year before it faced near default on foreign currency debt as reserves shrunk to around one million dollars.
The New York-based ratings agency said India's sovereign local currency, or rupee, credit rating was raised to BBB-/A-3 from a speculative, or junk, grade of "BB+/B with a stable outlook linked to fast economic growth and a declining budget deficit.
"India's economic prospects remain strong and are rising gradually, with GDP trend growth likely to average more than 7.5% in the medium term," Standard and Poor's credit analyst Ping Chew said.
The ratings agency said the country should continue sound fiscal policy which is guided in India by a Fiscal Responsibility Act that mandates steady reductions in the budget deficit to ensure the rating. "The ratings on India remain constrained by the country's weak fiscal profile, especially its high government debt burden and deficit, which is still one of the worst among all rated sovereigns," the ratings agency said.
Copyright Agence France-Presse, 2007