High growth rate insulates India from global risks: S&P

New Delhi: India is facing various factors that may shake its sovereign credit metrics, but strong economic growth rate and external balance sheet are expected to neutralize the risks inherent in the global environment, S&P Global Ratings said on Wednesday.

In a credit FAQ titled 'Can India Sovereign Ratings Withstand The Global Sputter', S&P said despite India's strong external balance sheet, it has not been able to escape the difficult landscape the rest of its emerging market peers have faced over the course of the year and 'more severe conditions', could apply downward pressure on India's sovereign credit ratings. S&P has the lowest investment grade rating of 'BBB-' on India with a stable outlook. "India is facing a mixture of factors that may shake its sovereign credit metrics. Amid external turbulence, its foreign exchange reserves are falling, and its current account deficit is rising. Meanwhile, the economy is battling faster inflation and tightening financial conditions both at home and globally," S&P Global Ratings sovereign analyst Andrew Wood said.

India's strong economic growth rate has long been an important counterbalance to its high fiscal deficits and debt burdens, and its sound external balance sheet helps to buffer against global market turbulence. "We expect these strengths to help neutralize the risks inherent in the treacherous global environment," the US-based agency said. S&P forecasts Indian economic growth to slow to 7.3 per cent in current fiscal, from 8.7 per cent last year. India's central bank RBI expects economic growth this fiscal to be at 7 per cent. "Under more severe conditions though, a few factors could have the potential to apply downward pressure on our sovereign credit ratings on India," Wood added.