India might not face any vital fallout from Fitch Ratings downgrading US sovereign credit score citing ballooning fiscal deficit and erosion of governance, stated Atul Arya, Senior Vice President and Chief Energy Strategist, S&P Global Commodity Insights.

“In terms of longer-term trends, we do not see any impact on India,” Arya informed Moneycontrol in an interview on August 3. Terming the South Asian nation a “bullish emerging market”, he additional stated that there appears to be no rethinking on huge investments coming into India, at the least from the US, even after the re-rating.

“I haven’t seen any commitments being pulled out or downgraded due to the re-rating. India is a growth story. We will see bumps in the world, including in India, but the challenge and opportunity for the Indian government and people lies in how they tackle the bumps and keep growing,” Arya stated.

Fitch Ratings has downgraded US sovereign credit score by one stage, from AAA to AA+. The downgrade echoes the same transfer by Standard & Poor’s Global Ratings in 2011, when the US authorities didn’t enhance the borrowing restrict regardless of rising debt. The standoff then had raised the US Treasury’s borrowing prices by $1.3 billion that yr, per a 2012 report by the Government Accountability Office.

The Fitch report cited “a steady deterioration in standards of governance over the last 20 years” and stated that “repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”

Arya stated that India has top-of-the-line demographics on this planet, however as a way to reap the benefits of this dividend, the South Asian nation wants to extend the participation of ladies within the workforce, which is “much lower” than the worldwide common. A report by S&P Global titled Look Forward: India’s Moment, launched on August 3, stated that as of 2022, girls comprised solely 24 p.c of the nation’s manpower.

India is now probably the most populous nation on this planet, surpassing China, per a United Nations Population Fund (UNFPA) report in April 2023. Experts consider that India’s demographic benefit — its younger inhabitants — and it’s consumer-driven economic system, might be vital components in driving the nation’s improvement, and current an unlimited alternative for financial progress.

Asked whether or not India dangers lacking the bus on changing into a number one energy, Arya stated there are each geopolitical and home challenges. He cited local weather change as certainly one of key dangers for India and the world, including that although 40 p.c of Indian firms are already taking a look at dangers related to local weather change, they must take steps to change into extra resilient.

Fiscal tightening

Applauding India for steering a secure fiscal coverage, Arya stated that although there was “so much fiscal tightening across the world, in India it’s been small, at only 250 basis points.”

He added that India has not been impacted by international challenges, notably fiscal challenges akin to from the Organisation for Economic Co-operation and Development (OECD).

“We expect further tightening in the US as the Fed (Federal Reserve) has said that it is not quite done, though it may slow things down. India’s central bank will have to see how they see all this fiscally. But India’s economy and overall balance sheet is very strong right now,” Arya stated.

The Reserve Bank of India has raised the benchmark repo fee by 250 foundation factors (bps) to six.5 p.c in 2022-23, however saved it unchanged in 2023-24 because the Consumer Price Index (CPI) inflation fell sharply, hitting a 25-month low of 4.31 p.c in May. However, information for June launched on July 12 confirmed inflation had snapped a four-month falling streak and risen to 4.81 p.c, larger than economists’ expectations of 4.6 p.c. One foundation level is one-hundredth of a proportion level.