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S&P hikes India's currency rating a tad
Standard & Poor's raised foreign currency rating by a notch to 'BB+', praising Govt's recent deficit-trimming efforts.
Global rating agency Standard & Poor's raised India's foreign currency rating by a notch to 'BB+', praising the Government's recent deficit-trimming efforts and the country's huge pile of foreign exchange reserves.
S&P also affirmed its 'BB+' long-term local currency and short-term ratings, and said the outlook was stable.
"The upgrade on the foreign currency reflects India's improved external position and growth prospects," it said.
The rupee jumped nearly 0.6 per cent to within a whisker of a five-year peak, while the yield on the benchmark 10-year bond eased 3 basis points to 6.6856 percent.
The agency said the upgrade was supported by strong external finances and prudent debt management, which had lowered the risk associated with the Government's massive fiscal deficit.
"It (the ratings upgrade) has captured the prevailing upbeat mood in the economy," said senior policy adviser at the Confederation of Indian Industry in New Delhi, TK Bhaumik.
"Overall the sentiment is good, stock markets are rising, investment outlook is positive, industrial output is buoyant. The economy is on a firmer footing now than it was ever before."
Foreign exchange reserves stood at $129.4 billion on January 21, up from $104.2 billion a year earlier. Analysts say the reserves are enough to take care of nearly 18 months of imports and are about 20 times the country's short-term external debt.
While India's external finances have improved in the past few years, the Government also enacted a new law to curb a stubbornly high fiscal deficit last year.
India's fiscal deficit stood at 4.8 per cent of gross domestic product in year ended March 2004 and the Government has committed to trim it by 0.3 percentage points every year under the new fiscal responsibility law.
India's economy, Asia's fourth-largest, grew 8.5 per cent in the year ended March 2004 and is expected to expand by at least 6.5 per cent this year.
Lured by the robust growth prospects, foreign portfolio investors ploughed a record net $8.5 billion into Indian shares in 2004, and the key market index - Sensex rose 13 per cent.
