"India's low income levels and weak fiscal and debt indicators constrain the country's credit profile," S&P said in a note.
Although it said that last year's election results have created a conducive environment for reforms with political stability, the agency termed the "governance effectiveness" as a "neutral credit factor".

S&P said higher growth in real per capita GDP, stronger fiscal/debt metrics and an improved external position as well as monetary policy setting are essential to enhance the current 'BBB' rating with a stable outlook.

"The government's ability to fulfil its promises on key reforms will therefore be critical," S&P credit analyst Agost Benard said.
The government's fiscal consolidation plan, which entails a gradual lowering of the fiscal deficit over the next three years, will ease the debt and interest burden but "improvements in India's weak fiscal balance sheet are likely to be gradual," he added.
The government has promised to keep the deficit at 4.1 percent for FY'15 and is targeting to bring it down to 3.6 percent in FY'16 and push it further to 3 percent by FY'17.
After comparing India with other BBB-rated peers like Brazil, Colombia, Indonesia, the Philippines, South Africa and Uruguay, the agency said the average income in India is "significantly low" and the "government is also more heavily indebted".
"The country's stronger external balance sheet only partly offsets these weaknesses," it said.
Flexibility on the monetary policy front, where RBI has shifted to rate cuts, is "moderately supportive" of the sovereign's credit-worthiness, it said.

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