The rating action by S&P came days after Moody’s Investors Service downgraded India’s rating by a notch. S&P, however, said the impact of the Covid-19 outbreak posed a significant challenge to the country’s economic growth trajectory. It said economic growth and the fiscal situation of the Centre and states would improve by next year, and hoped the reforms initiated by the government would bear fruit in the long run.
“The ratings agencies have also spoken about debt sustainability and how they expect the general government debt-GDP ratio to remain sustainable,” Subramanian said.
When asked of the possibility of the Reserve Bank of India directly monetising the Centre’s fiscal deficit in the remaining part of the year, Subramanian said: “There have been comments on monetisation that span the spectrum. The finance ministry has evaluated various options, including this. Like with anything else, we keep all options under consideration and keep evaluating them.”
Subramanian said the Centre’s plan, announced by Finance Minister Nirmala Sitharaman in the 2020-21 Union Budget, of getting sovereign bonds listed on global indices, was on track. However, he added that he does not expect much inflows from that route this year because of Covid-19.
“These indices track $4 trillion in capital every year. Even if we are at the lower end, we can raise $60 billion. This is an extremely important step in long term,” he said.
“Even if there was no pandemic due to Covid, first year returns would have not been that good. Given the pandemic, not much money may come this year. So I would say that the amount this year would be quite uncertain.”
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