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Following recent India’s Outlook downgrade by Moody’s Investors Services, Standard and Poor’s (S&P) Global affirmed India’s long-term foreign and local currency sovereign credit rating at the lowest investment-grade level while maintaining its stable outlook on the economy.

Key takeaways

“India’s long-term rating was affirmed at ‘BBB-‘with a stable outlook while the short-term rating was held at ‘A-3’.”

“S&P’s stable outlook reflects its expectation that the Indian economy will recover following the containment of the COVID-19 pandemic, and maintain its sound net external position.”

“While risks to India’s long-term growth rate are rising, ongoing economic reforms, if executed well, should keep the country’s growth rate ahead of peers.” 

“Expect the government’s fiscal deficit to touch 11% of GDP in the current year to March 2021 on the back of pandemic related spending.”

Market reaction

USD/INR is trading on the front-foot near 75.70 levels, as the rupee remains pressured by the above report. Broad-based US dollar bounce, in the wake of the Fed induced risk aversion on the global equities, also underpins the rebound.

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