Credit Rating firm Standard & Poor’s (S&P) Global has revised credit outlook to positive while retaining sovereign credit rating to 'BBB-' for long-term and 'A-3' for short-term unsolicited foreign and local currency.

• Revised credit outlook is on account of India's robust economic expansion, broad continuity in economic reforms and fiscal policies, prioritization of fiscal consolidation efforts, and improved quality of government expenditure.

About Sovereign Credit Rating (SCR)

• SCR represent an assessment of a country's or sovereign entity's ability to meet debt obligations, including both capability and willingness to repay debt.
• SCRs are dominated by 3 US-based rating agencies – S&P, Moody’s, and Fitch.

Significance of SCR

• Borrowing cost: Higher credit ratings indicate lower risk, allowing countries to borrow at lower interest rates.
• Access to capital markets: Higher credit ratings can result in easier access to international capital markets, as investors perceive them as more creditworthy and are more willing to lend to them
• Policy implications: Governments often implement prudent fiscal and economic policies to improve credit ratings.

Issues with SCRs

• Lack of transparency on methodologies followed by rating agencies.
• Inadequately capture the economy’s fundamentals (ability and willingness to pay).
• Allegations of bias against emerging economies.