February 2, 2018 / 8:10 AM / 2 years ago

Sustaining economic growth key to India's rating - S&P analyst

FILE PHOTO: An India Rupee note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

MUMBAI (Reuters) - An S&P Global Ratings analyst said on Friday that sustaining economic growth, including by boosting infrastructure spending, would be critical to India’s ratings.

Kim Eng Tan, senior director at the rating agency, said India’s 2018/19 fiscal budget unveiled on Thursday had assumptions for income tax collection that were “somewhat optimistic,” adding that any shortfalls might lead to cuts in “the much-needed infrastructure spending.”

Reduced infrastructure spending has the potential to hit economic growth, Tan told a conference call, a prospect that may lead S&P to consider reducing India’s rating.

S&P rates India at “BBB-minus” with a “stable” outlook. “BBB-minus” is the lowest investment-grade rating.

“If growth were to slow and if the government deficit were to rise significantly this could cause us to lower the rating. Or if we perceive that the political will to maintain India’s reforms were to sputter, that’s another reason we could lower the rating,” Tan said.

Reporting by Abhirup Roy and Rafael Nam; Editing by Jacqueline Wong

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