India Inc raises toast to S&P's ratings upgrade
When global rating agency Standard & Poor’s raised India’s sovereign credit rating on Tuesday to investment grade, based on the country’s strong economic prospects, India’s corporate chieftains raised a toast.
By TNN |
MUMBAI: From being speculative, to spectacular investment grade, it���s yet another elevation for India. When global rating agency Standard & Poor���s raised India���s sovereign credit rating on Tuesday to investment grade, based on the country���s strong economic prospects, India���s corporate chieftains raised a toast.
���The upgrade to investment grade ��� from BB+/B to BBB-/A-3 ��� reflects India���s strong economic prospects, external balance sheet and its deep capital market that supports a weak, but improving fiscal position,��� S&P said in a statement. India���s rating was earlier in a speculative grade.
���I am happy. It is an acknowledgement of India���s improving macroeconomic stability and strength,��� finance minister P Chidambaram was quoted as saying by news agencies. Corporates welcomed the move saying it would ease borrowings. ���By raising the debt rating to investment grade, more companies will be eligible for investment grade rating.
Thus more investors and lenders will be ready to pump money to India, which will lead to a pool of financial resource being made available to companies here,��� said YM Deosthalee, chief financial officer, Larsen & Toubro. He said there would be a marginal impact on the cost for raising funds.
���India���s economic prospects remain strong and are rising gradually, with the GDP trend growth likely to average 7.5% in the medium term,��� said an S&P analyst. He said consistent monetary and fiscal policies had sustained macroeconomic stability and attracted foreign capital and from NRI.
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���Further rating improvements will depend on sustained prudent fiscal policy that leads to a decline in government debt and interest burden, and further reforms that lift the country���s growth prospects and income levels,��� he said. According to Aditya Birla group CFO Sumant Sinha, ���The upgrade will help in easing financing costs. It is vital in the international debt market, although in equities market, the upgrade may not make much impact as it has already been discounted.���Mr Sinha said that the move is a welcome one and was expected. ���There was a dichotomy as the other two rating agencies, Moody���s and Fitch, have already rated India as investment grade.��� Moody���s has an investment-grade rating of Baa3 for India���s foreign currency debt, while Fitch rates both India���s long-term foreign and local currency debt investment grade at BBB-.
Pfizer India MD Kewal Handa said the confidence India now enjoys is the result of the reform process. ���However, if a new wave of reforms does not take off now, it will be difficult to sustain this growth and the rating. To open up the rural markets, it is vital to have reforms in infrastructure and in health care.
China and South Korea are fast overtaking India in the clinical trials segment due to lack of reforms. ���Also, the government needs to spend at least $15 billion more in healthcare so that state spending in health reaches about 3%of GDP. The current spending is about 1% of GDP,��� Mr Handa added.
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