India’s Economic Growth Is For Real, Confirms S & P

• Thursday, March 18th, 2010

The amazing recovery of Indian economy from the turmoil of global recession and its steady climb back to the pre-recession growth rate is not a fluke after all. Standard & Poor (S & P), the global ratings agency has recognized India’s growth story by revising its ratings outlook for the country from ‘negative’ to ‘stable’.

S & P has made this positive revision based mostly on the 8% growth rate forecast for the next fiscal year. This is one of the highest among world countries. S & P in a release said, “The revision in outlook reflects our view that India’s fiscal position could now begin to recover and that its economy will remain on a strong growth path.”

For the upward revision, S & P has also taken into consideration, the government’s commitment in bringing down the burgeoning fiscal deficit. The budget has proposals to bring down the deficit drastically during the next fiscal year. Despite this, S & P has cautioned about the high fiscal deficit, government debt and rising inflation.

However, India’s long term ratings stay put at ‘BBB-’ and short term ratings at ‘A-3’. The present upward revision reverses last year’s downward revision, when Indian economy was bogged down by global downturn. The report said that the ratings could improve if India could contain its public sector deficits substantially. Or it could get worse ‘if the government continues its loose fiscal policy or there are policy setbacks’.

The country also faces other risks such as another global slowdown or slower global recovery. Even a sudden spurt in global oil prices can upset the delicate balance. In spite of the ‘uncertainties’, the future looks promising for Indian economy.

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