S&P assigns rating to Kerala; cites weak budgetary, debt metrics

S&P Global Ratings Wednesday assigned 'BB' long term rating to Kerala, reflecting its weak budgetary and debt metrics.

This is the first time that S&P has assigned a local and regional government (LRG) rating in India, the agency said in a statement.

"Our ratings on Kerala reflect the Indian state's weak budgetary and debt metrics driven by its large spending on socio-economic welfare to support a low-income economy. We view the state's internal liquidity position as very weak but mitigated by proven access to deep domestic capital markets," S&P said.


While assigning 'BB' long-term issuer credit rating and 'B' short-term issuer rating to Kerala, S&P kept the outlook on the long-term rating as stable.

'BB' reflects major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, while 'B' indicates that the obligator has the capacity to meet its financial commitments.

The rating on Kerala benefits from a central government framework that has a track record of providing extraordinary support toward debt relief.

"Kerala's financial management is considered satisfactory on a global comparative basis, and we view its long-term planning to be better than that of most domestic peers," S&P said.

The stable outlook reflects our view of the state's strong economic growth over the next 12 months and the likeliness of the central government support in the case of financial distress, it added.