Informist, Tuesday, Jul. 8, 2025

--S&P: India may see external support for rating slip on geopolitical risk

NEW DELHI – Economies like India, which report current account deficits or where surpluses are small, may see slipping external support for their sovereign ratings amid increased global geopolitical risk, S&P Global Ratings credit analyst Kim Eng Tan said Tuesday. Uncertainties on US trade tariffs and the war in West Asia threaten the positive momentum of Asia-Pacific sovereign ratings, the agency said.

India's current account deficit was 0.6% of GDP in 2024-25 (Apr-Mar) and economists see it at 0.7-1.0% of GDP in the current financial year--S&P's forecast is at the upper end of that band. The US announced fresh tariff rates for some trading partners on Monday and has delayed the implementation of reciprocal tariffs to Aug. 1. While this impacts exports in East Asia particularly, the region is also a large net energy importer and may have to pay more for such imports should the ceasefire between Iran and Israel fall apart. Despite this, S&P has made no changes on sovereign rating or outlooks in Asia-Pacific in Jan-Jun, it said.

"In part, this reflected expectations that the global economy will avoid the worst outcomes possible," the ratings agency said. "Amid the more uncertain global environment, we continue to expect domestic developments in some regions to support improvements in credit metrics."

If these global risks materialise, fiscal math across economies would also deteriorate, the report said. As prices of food and energy potentially increase, countries like India and Malaysia that spend significantly on subsidies may see more pressure. This is in addition to revenue lost from exporters' taxes and higher domestic inflation keeping financing costs high, S&P said. In Asia-Pacific, these geopolitical risks do not have to come from afar, the ratings agency said, pointing to the India-Pakistan conflict in early May.

S&P Global kept India's sovereign rating score unchanged from the last forecast in December despite the risks, and the report did not constitute a rating action. India's sovereign rating by S&P is 'BBB-' with a positive outlook, last affirmed in December. Its GDP growth estimates for India were unchanged from its June report, at 6.5% in the current fiscal and 6.7% in the next.

The ratings agency sees India's general government balance at (-)7.3% of GDP in FY26, and (-)7.0% in FY27, referring to the combined fiscal deficits of the Centre and states. The Centre's fiscal deficit aim in the current fiscal is 4.4% of GDP. General government debt as a percentage of GDP may fall to 81.4% in FY27 from 82.3% at the end of the current fiscal and 82.7% on Mar. 31, S&P Global Ratings said. End

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.