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Informist, Thursday, Dec. 19, 2024

 

MUMBAI – The resultant strains due to the introduction of potential large tariffs by US President-elect Donald Trump in 2025 could diminish the likelihood of a sovereign rating upgrade for many countries in Asia-Pacific, including India, S&P Global Ratings said in a report Thursday. S&P Global currently has a 'BBB-' rating on India, with a positive outlook.

 

The rating agency warned that geopolitical strains, and the possibility of escalating trade sanctions and tariffs between the US and China, are likely to derail positive sovereign credit trends in the Asia-Pacific in 2025. However, while an increase in tariffs by the US poses risks to export economies in the region, the agency does not expect any policies by the US to bring immediate pressure on sovereign ratings in the region. Most sovereign ratings in the region are currently investment grade, S&P Global said.

 

Trump is also looking to charge India higher tariffs. On Tuesday, the president-elect of the US fired a fresh salvo against India's tariff regime, and reiterated his intention to impose reciprocal tariffs in retaliation, as per news reports. "If they tax us, we tax them the same amount. They tax us, we tax them. Almost in all cases, they're taxing us, and we haven't been taxing them," Trump was quoted as saying by news agency PTI.

 

INDIA'S RATING

S&P Global would upgrade its sovereign ratings on India if the country's fiscal deficit narrows meaningfully enough to bring the general government debt below 7% of GDP on a structural basis. "The protracted rise in public investment in infrastructure will lift economic growth dynamism that, combined with fiscal adjustments, could alleviate India's weak public finances," S&P Global said.

 

In addition, ratings could also be upgraded if there is a sustained and substantial improvement in the Reserve Bank of India's policy effectiveness and credibility, S&P Global added.

 

However, ratings could be downgraded by S&P Global if there is an erosion of political commitment to maintain sustainable public finances. Additionally, if current account deficits materially weakens India's external position to an extent that the country becomes a narrow net external debtor, the outlook could be downgraded to stable from positive, S&P said.  End

 

Reported by Anand JC

Edited by Tanima Banerjee

 

 

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