S&P Global Ratings to weigh agri, labour market reforms, improvement in financial sector to determine future ratings

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In order to determine ratings with regard to the Indian economy in future, S&P Global Ratings will give credence to reforms in agriculture and labour market, according to a senior official. Also, the agency will take into account the gradual easing of bad loans stress of the country’s banking sector.

“The return of insolvency provision under the Insolvency and Bankruptcy Code (IBC), which was suspended for at least six months, and stronger regulator framework would be important in improving the health of Indian banks,” Andrew Wood, S&P Director & Lead Analyst Sovereign & IPF Ratings APAC, said.

The rating agency would give credence to reforms to the domestic agriculture sector, labour market’s liberalisation thereby job creation in the industrial sector, infrastructural improvement and business-friendly foreign investment policy, according to S&P Director.

“The reforms that we will give credence to is reforms in the agriculture sector, into domestic markets. Those have been introduced and that’s somewhat path-breaking in history of India. It would help address the supply side bottlenecks that have cropped up in the economy in the past as well as to make the agriculture sector more efficient,” Wood said.

Stating that in India, states decide on labour laws and related reforms, Wood said, “But the BJP Government has a strong mandate and appears to be pushing harder on the states to get this done. We would be looking at liberalisation of labour markets further”.

Efforts to bring in foreign capital, private sector in infrastructure and improving the business environment through that route is going to be very crucial, he said, adding attracting FDI is also very significant.

It is worth noting that S&P Global Ratings has projected the Indian economy to shrink by 5% in the current fiscal. However, the growth is likely to bounce back to 8.5% next fiscal.

India’s economic growth potential is 6.5-7% in medium and long-term but reforms are of paramount importance for the nation to get back to recovery, according to the rating agency.