Home ›› 11 Mar 2022 ›› Asia Biz
The Reserve Bank of India may feel pressure to tackle inflation sooner than it expected following a surge in global commodity prices, sovereign ratings analyst Andrew Wood of S&P Global Ratings said on Thursday.
Although elevated, India’s current ratio of debt to GDP, at about 90 per cent, has already been factored into the agency’s existing sovereign rating of BBB- with a stable outlook, Wood said on a regional conference call.
“We had expected a gradual start to the normalisation of rates and monetary policy as a whole from the RBI,” he added.
“But should inflation breach its 4 per cent to 6 per cent target for a longer period of time, the central bank could face pressure to normalise more quickly.”
The agency expects India to grow 9.8 per cent in the current fiscal year, which ends in March, and stay above trend to achieve growth of 7.8 per cent in fiscal 2022/23. Wood said higher energy and electricity costs could crimp the buoyancy of private consumption and possibly take the wind out of the sails of an otherwise strong economic recovery now seen in India, but overall the picture was still positive.
“On the external front, India became a net external creditor country in the context of the Covid-19 pandemic, alongside a very fast foreign exchange reserves accumulation, so this is going to act as an additional buffer for its credit ratings for the time being,” Wood said.
