Kumar Bahukhandi
&P Global has increased India’s rating—Photo Credit PTI (File)
Global rating agency S&P has raised India’s sovereign credit rating to BBB, which was earlier BBB-. The agency has also said that the impact of tariffs on India will be minor.
Global credit rating agency S&P Global has raised India’s long-term sovereign credit rating from ‘BBB-‘ to ‘BBB’, citing a strong economy and sustainable growth. This rating means that India’s outlook remains stable and it is moving towards becoming the world’s third largest economy. The country is also dealing with global challenges such as tariffs and trade.
S&P’s statement has come at a time when US President Donald Trump called India’s economy a ‘dead economy’ and announced tariffs on India. The US rating agency said in its statement that India’s rating reflects its rapid economic growth and better policies to control inflation.
The agency said that better efforts for revenue and efforts to improve expenditure have strengthened India’s loan standards. Rating agency S&P Global has said that the impact of US tariffs on the Indian economy will be manageable and overall its impact will be minor, which will not affect India’s long-term growth prospects.
60 percent revenue is being generated in India itself
The rating agency said that we believe that the impact of US tariffs on the Indian economy will not be very high. India is less dependent on trade and about 60 percent of its economic revenue comes from domestic consumption. We estimate that if India has to stop importing Russian crude oil and the fiscal cost is completely borne by the government, then its impact will not be very high.
India exports this much to America
The agency said that even though America is India’s largest trading partner, we still do not think that 50 percent tariff will not have any significant impact on India’s growth. India’s exports to America are about 2 percent of GDP. Keeping in mind the sector exemptions on pharmaceuticals and consumer electronics, Indian export risk subject to tariffs is less than 1.2 percent of GDP. Although this could have a one-time impact on final growth, we believe the impact will be minor and will not affect India’s long-term growth prospects.
S&P Global Ratings director Yifarn Phua expressed a similar opinion on Wednesday. Phua said Trump’s tariffs are unlikely to affect India’s economic growth. The report said that even in the long term, the impact of the tariffs will be minimal or may not be visible at all, because India can also look for other options.
