The rating agency sees the banking system’s weak loans ratio at 12 percent of gross loans and expects credit cost to remain elevated at 2.2-2.7 percent.
S&P Global Ratings, on February 16, said that India was on track for an economic recovery in FY22 with an estimated economic recovery at 10 percent in FY22.
Consistently good agriculture performance, flattening of COVID-19 infection curve supporting economy and a pickup in government spending is supporting the economy, the ratings agency said.
S&P Global Ratings also expects India’s banking system’s performance to start improving materially in FY23.
It further noted that Indian economy still faced risks as it transitioned from stabilisation to recovery.
Emergence of more contagious COVID-19 variants with the potential to evade vaccine-derived immunity a major risk to recover and Possibility of early withdrawal of global fiscal stimulus also poses a major risk to India’s recovery, the ratings agency noted.
It, however, noted that India’s near-term prospects are positive.
Indian government’s recently released budget to also support economic recovery and improving growth prospects are critical to its ability to sustain higher deficits, the ratings agency said.
Pickup in government spending supporting the economy, it added
India faces an estimated permanent loss of about 10 percent of GDP output versus its pre-pandemic path, S&P Global Ratings said.
