ARC gives India sovereign rating of 'moderate risk'

Newly-launched ARC Ratings on Monday assigned a 'moderate risk' rating of 'BBB+' to India, with a positive outlook in its first sovereign rating action.

The London-based agency, which has partnered with domestic agency Care Ratings, said it expects India's growth to accelerate from an annual average of 4.8% in 2012-14 to 6.5% in 2015-17, driven by a recovery in corporate investment, robust domestic consumption and the new government's aggressive growth-enhancing structural reform programme.

"We have assigned a long-term foreign currency issuer rating of BBB+ to India. We have also assigned a long-term local currency issuer rating of A- to the country," the rating agency said, adding that the outlook on both ratings is stable. The agency further said that the country's growth prospects are a key consideration for its sovereign ratings.

Explaining the rationale for the country's rating, the agency said, "The country's low external vulnerability is characterised by low external debt ratios and moderate current account deficits. "Foreign currency indebtedness of the government is very low, as are non-resident holdings of government securities." It also assigned a foreign currency country ceiling of A- and a local currency country ceiling of A to the country. Short-term sovereign ratings of A-2 were assigned.

All ratings assigned are unsolicited, ARC said in a statement.

On the rating methodologies it would be using while assigning sovereign ratings, ARC Ratings Managing Director and CEO Alexandra Mousavizadeh said the approach is to look at everything and take into consideration more risks which other international agencies usually ignore. The agency said the foreign reserves, which are at USD 315 billion, are adequate for the country. It said the pro-business policy reform agenda of the new government will lead to a faster-paced growth.