DK Srivastava, chief policy advisor at EY India, attributed the rating upgrade to the country maintaining a robust growth performance since the pandemic, outshining all other major global economies, while maintaining a sustained thrust towards fiscal consolidation after its fiscal deficit had peaked in the Covid year of FY21.
“This upgrade makes India an attractive investment destination apart from tangibly reducing international borrowing costs for corporates,” he said.
Anish Shah, Mahindra group chief executive, has said the rating upgrade is a strong vote of confidence in the country’s robust economic fundamentals, disciplined fiscal consolidation, and sustained reform momentum.
“The upgrade will further boost global investor confidence, attract fresh capital, and accelerate the nation’s transformation,” Shah said.
According to Sujan Hajra, chief economist at Anand Rathi Group, any seasoned India observer will tell you that the country of today bears little resemblance to the India of the early 1990s. Yet in the eyes of the global credit rating agencies, such as S&P, the story has barely moved. For more than three decades, India languished at the lowest rung of investment-grade sovereign credit rating.
With this upgrade, many corporates can raise funds internationally at yields well below those faced by peers in countries with similar sovereign ratings, he said.
“Though the upgrade is a welcome development, it is also, by any reasonable measure, too little and too late. What market participants and India-watchers have long recognised is only now being acknowledged by the rating agencies. The reality is that our economic and financial dynamism has far outpaced its perceived credit risk,” Hajra said.
But he does not see anything for investors from this upgrade saying it changes little. “The positive trajectory of our equities and other asset classes is likely to continue, propelled by the same structural strengths that have underpinned their strong performance for years, irrespective of the verdicts handed down by credit rating agencies,” he added.
Vishal Goenka, cofounder of IndiaBonds.com, said the upgrade will encourage more foreign and FPI inflows into the government bond markets as this gives better risk-adjusted returns, with yields falling in the short term.