New Delhi: S&P Global Ratings on Thursday said India’s real gross domestic product growth is likely to recover towards the longer term trend rates over 2-3 years and affirmed 'BBB-' long-term and 'A-3' short-term foreign and local currency sovereign credit ratings.
It said the outlook on the long-term rating was stable.
The stable outlook reflects its view that “India's growth will stabilize and begin to recover from its current low ebb," the rating agency said in a statement. "Fiscal deficits will remain broadly in line with our forecasts over the next two years."
It also said that despite a “notable deceleration" in India's economy in recent quarters, the firm believed the country’s structural growth outperformance remains intact. “Real GDP growth is therefore likely to gradually recover toward longer-term trend rates over the next two to three years," it said.
However, the agency highlighted the slippage in India’s officially estimated fiscal deficit for FY20 and FY21. “India's fiscal position remains precarious, with elevated fiscal deficits and net government indebtedness. Fiscal deficits have exceeded the government's plan, and we expect limited consolidation over the next few years," it said.
India's factory output contracted in December and retail inflation shot up to a 68-month high in January, according data released on Wednesday, a day after the government cited seven economic indicators to claim that there was growth revival.
The National Statistical Office on Wednesday said the index of industrial production (IIP) shrank 0.3% in December compared to a 1.8% expansion a month ago, while retail inflation accelerated to 7.59% in January from 7.35% in the previous month.
The Reserve Bank of India has projected the economy to expand by 6% during the next financial year, pegging it at the lower end of the GDP growth estimate of the Economic Survey. The survey, tabled in Parliament last month, estimated the GDP growth during FY21 at 6-6.5%. The government has taken a host of steps to spur economic growth, which is estimated to have slowed to 5% in the current fiscal.
