Overview

• S&P officials said the 25% U.S. tariff already in effect and an additional 25% due on August 27 pose only a marginal short-term risk, noting exports to the U.S. are about 1% of GDP and not all goods are covered.
• India’s unsolicited sovereign rating was raised to BBB with a stable outlook on August 14, the first change in 18 years, reflecting robust growth, fiscal consolidation and a supportive policy framework.
• S&P expects infrastructure spending and a pickup in capital expenditure to lift the growth trajectory and reduce bottlenecks, underpinning its medium-term forecast.
• Proposed GST “next-generation” reforms with two main rates of 5% and 18% plus a 40% slab for sin goods are seen as revenue-neutral over time and possibly supportive of near-term consumption.
• With inflation contained and the interest service burden easing, S&P sees room for further monetary policy easing after RBI rate cuts totaling 100 basis points this year and a subsequent pause.