S&P: Growth of India's Economy Sufficient to Maintain Credit Rating

By: Taarek Refaat

WASHINGTON, Dec. 12 (SEE)- Global Rating firm Standard & Poor's (S&P) announced in a statement on Wednesday that India's rapid economic growth is sufficient to offset concerns regarding the reserve bank's independence and maintainance of credit rating in the desired investment grade (IG).

Official data showed the Indian economy grew by 7.1 percent in the third quarter of this fiscal year.

S&P analyst Roberto Sifon-Arevalo said that the independence of the reserve bank helps to boost disposable income, increase economic growth and

subdue inflationary expectations.

"A growth of 7 percent creates a flexible environment that reduces negative externalities prompting a less damaging impact to the economy," he added.

S&P retains India at "BBB-" medium-term credit rating with a non-payment risk of meeting financial obligations.

"The high growth in India is sufficient to maintain the stability of the credit rating, whereas if the economy grows only by 2 percent, circumstances will be more complicated," Sifon-Arevalo added.

The Indian government has recently put pressure on the reserve bank to stimulate lending, which resulted in the resignation of the Governor Urjit Patel last Monday.

S & P said India's rapid economic growth would be enough to offset concerns about the central bank's independence and maintain its credit rating in the desired investment grade.

Official data showed the Indian economy grew by 7.1 percent in the third quarter of this year.

"We always want to see the independence of the central bank because, in the absence of that, it could have very negative consequences for containing inflation and boosting growth," said Roberto Sivon Arevalo, a credit rating agency analyst.

The analyst said that with economic growth of 7% in India, this environment is quite flexible because it allows many of the negative consequences to occur without having a huge amount of damage.

Standard & Poor's puts BBB as a medium-term credit rating and acceptable non-payment risk, but economic conditions can affect its ability to meet financial obligations.

Arifalo said that at present the high growth in India is enough to maintain the stability of the credit rating, while if the economy grows by 2% it will be more complicated.

The Indian government has repeatedly put pressure on the central bank to stimulate lending, which resulted in the resignation of "Orgit Patil" from his position as governor of the bank, to be appointed "Shaktikanta Das instead.