After Moody’s, all eyes on S&P, Fitch Ratings

According to analysts, ratings agencies may wait till the country’s fiscal position improves

Men walk past the headquarters of Fitch Ratings in New York.

After ratings agency Moody’s upgraded India’s sovereign rating after a gap of almost 14 years, the attention is now on the other two global rating agencies, Standard & Poor’s and Fitch Ratings.

Responding to a question from the media, on whether the government expected other agencies such as S&P and Fitch to upgrade, Chief Economic Adviser Arvind Subramanian was quoted by news agency PTI as saying, “Let's hope they are not inconsistent amongst each other.”

Dr. Subramanian had earlier observed that ratings agencies followed inconsistent policies while rating India as opposed to awarding ratings to China.

According to analysts, rating agencies may wait till the country’s fiscal position improves.

“The question now is whether or not S&P and Fitch follow. Our bias is that they will likely wait for the government’s fiscal position to actually improve before making any changes (on outlook, followed by a rating upgrade), but directionally we believe India is headed the right way,” Nomura said in a note to its clients.

In October, S&P had said the country needed to improve its fiscal position for a rating upgrade.

“For an upgrade, India would have to address its weak fiscal balance sheet and weak fiscal performance. India has one of the highest general government debt-to-GDP levels (68%) among emerging market sovereigns,” S&P had said.

S&P, in October, kept India’s sovereign rating unchanged at the lowest investment grade with a stable outlook.

“Year after year, the fiscal deficit remains relatively large with the interest burden and subsidies taking a big chunk of government spending. So there's not a lot of room for the government to manoeuvre, despite pressing infrastructure needs. A potential rating upgrade is likely to come from improved fiscal performance,” it added.

S&P declined to comment whether the agency is considering a rating revision. “As of now, we have no comment to make on it,” a spokesperson said while responding to an email query. Response from Fitch Rating was still awaited while going to press.