Indian Finance Ministry officials met with representatives of the credit rating agency Standard & Poor (S&P) to seek a possible credit rating upgrade for the country, Press Trust of India has reported. The macroeconomic stability of the country was cited as one of the primary drivers for a possible upgrade.

The discussions with the credit rating major covered a range of issues from the rise in crude prices to the increasing revenue collection under Goods and Services Tax (GST).

There is a dissonance between government officials and representatives of the rating agency over the debt to GDP ratio of the country. While government officials have stated that debt to GDP should not be viewed from a short-term perspective, the rating agencies have expressed concerns that the current ratio is too high at 68.5 per cent.

Further, concerns are being expressed that rising crude prices combined with a sharp depreciation in the value of the rupee would lead to India breaching both the fiscal deficit and current account deficit (CAD) targets.

S&P has maintained India’s rating at BBB- which is the lowest investment grade and wants the debt to GDP ratio to fall below 60 per cent before an upgrade is considered.

It has been mandated by the Fiscal Responsibility and Budget Management (FRBM) committee that the combined Central and State debt to GDP ratio be brought down to 60 per cent by 2023.

Only time will tell whether discussions between the government officials and the credit rating agency bear fruit with an upgrade for India’s ratings.