Standard and Poor’s on Wednesday ruled out an upgrade in India’s “BBB-minus” (the lowest investment grade) rating for 2016 and 2017 citing weak public finances and low per capita income, NDTV reported NDTV. "We are affirming our "BBB-" long-term and "A-3" short-term sovereign credit ratings on India. The stable outlook balances India's sound external position and inclusive policy making tradition against the vulnerabilities stemming from its low per capita income and weak public finances," the rating agency said, according to IANS.

However, the American agency praised the Indian government for introducing the Goods and Services Tax Bill "to replace complex and distortive indirect taxes". Economic Affairs Secretary Shaktikanta Das said the agencies should look into it and figure out why India’s rating was not upgraded.

Advertisement

"[We] Cannot understand why India's rating has not been upgraded. The rating agencies need to internally examine the disconnect between foreign investors' and rating agencies' views," he said adding that investors also shared the view that India was “highly under-rated”. However, Das said the government was not questioning the process followed by the agency. "The S&P outlook on India highlights the reforms undertaken by the government. It recognises that India is continuing structural reforms," Das said.

The reasons listed by the agency for its decision to refrain from an upgrade in India's case include wide fiscal deficits, a heavy debt burden, and low per capita income nonetheless detract from the sovereign's credit profile. "We expect GDP growth of 7.9% in 2016 and eight per cent on average over 2016-2018. We believe domestic supply-side factors will increasingly bind economic performance, and the government has little ability to undertake counter cyclical fiscal policy given its current debt burden," it said.

While Fitch Ratings agency has given India a "BBB-minus" rating, Moody's Investors Service gave a "Baa3" rating with a "positive"outlook.