S&P upgraded India’s long-term Sovereign Credit Rating to ‘BBB’ from ‘BBB-’ and its short-term rating to ‘A-2’ from ‘A-3’, with a Stable Outlook.
- This marks the India’s first sovereign upgrade by S&P after 2007 when India was elevated to investment grade at BBB-.
- The upgrade reflects India’s commitment to fiscal consolidation, improved quality of public spending, and strong corporate, financial and external balance sheets.
About Sovereign Credit Ratings (SCR)
- It refers to an independent evaluation of a country's creditworthiness, and seek to quantify issuers’ ability to meet debt obligations.
- Major SCR agencies: S&P, Fitch and Moody’s.
- Rating Grades: SCR broadly rates countries as either investment grade or speculative grade, with the latter projected to have a higher likelihood of default on borrowings.
- The investment-grade rating ranges from BBB- to AAA for S&P and Fitch and Baa3 to Aaa for Moody’s.
- Significance: When favourable, these can facilitate countries' access to global capital markets and foreign investment, and reduce borrowing costs.
- Issues: There are concerns over bias in rating processes, conflicts of interest, and rating ceiling.
- Rating ceiling relates to the notion that a corporate issuer is not rated higher than the country that it resides within, constraining growth of a country’s domestic marketplace.
