India must boost growth, cut its fiscal deficit and fulfil promises of financial and fiscal reforms in order to justify an upgrade in a credit rating, currently lodged one rung above junk bond territory, rating agency Standard & Poor's said on Monday.

S&P raised India's credit rating outlook to 'stable' from 'negative' in September, citing the prospect of reforms. The agency, in a news release issued on Monday, listed what it needed to see to upgrade India's sovereign debt credit rating from 'BBB-minus'.

"Crucial factors include higher growth in real per capita GDP, stronger fiscal and debt metrics, and a stronger external position or improved monetary policy setting, and the government's ability to fulfil its promises on key reforms will be critical to the country's success," S&P said.

The government presents its annual budget for fiscal 2015/16 on Saturday, but S&P said it did not expect swift progress on fiscal consolidation, and if this was the sole consideration India would have to wait several years before an upgrade.

"Improvements in India's weak fiscal balance sheet are likely to be gradual and are thus unlikely to lead to a rating upgrade in the next three to five years," S&P said, adding that the country's fiscal and debt indicators are the weakest among peers like Brazil and Indonesia.

The Budget will be closely watched for pro-growth measures, reforms for the power sector and other areas of infrastructure, as well as fiscal consolidation.

Related Topics