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India's policy reforms to affect sovereign ratings - S&P
April 15, 2014 / 5:27 AM / 4 years ago

India's policy reforms to affect sovereign ratings - S&P

MUMBAI (Reuters) - The direction and pace of policy reforms in India, more than which political party takes control after elections, will have a bearing on the sovereign rating, said Standard and Poor’s rating agency on Tuesday.

Labourers work at the construction site of an educational institute in Gujarat December 21, 2013. REUTERS/Amit Dave

“An important factor is how fragmented the government will be. The more parties involved in the next coalition government, the more likely policies will be incoherent and less supportive of credit attributes,” said Kim Eng Tan, sovereign credit analyst at S&P, in a statement.

The world’s biggest-ever election is under way in India, Narendra Modi, the prime-ministerial candidate of the Bharatiya Janata Party (BJP), taking on the ailing ruling Congress party and several regional parties.

Most surveys predict BJP will win the biggest chunk of seats but fall shy of the halfway mark, forcing them to seek a coalition with the powerful regional parties. Voting runs until May 12 and results are due on May 16.

S&P has a BBB- rating on India with a negative outlook and has warned of the risks of a ratings downgrade in the absence of structural reforms, fiscal consolidation and if economic growth decelerates further.

Reporting by Suvashree Dey Choudhury; Editing by Jacqueline Wong

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