"If the central government is able to bring down fiscal deficit to 4%of the GDP, we will consider a rating upgrade over the next 24 months," Phua said. The central government estimates to bring down fiscal deficit to 5.1% of the GDP in the current fiscal, from 5.63% in 2023-24.
As per the fiscal consolidation roadmap, the deficit-the difference between government expenditure and revenue will be brought down to 4.5% by 2025-26.
The US-based rating agency had in May, upgraded outlook for India to positive, from stable, while retaining the rating at 'BBB-'.
Phua further said the Indian economy has clocked an average of 8% growth in the last three years, driven by domestic consumption and
"We see the medium-term growth potential for India at 7%," Phua said.
If the infrastructure bottlenecks are removed, that will lead to 8% growth potential without the risk of overheating, he added.
S&P Global Ratings Chief Economist, Asia-Pacific, Louis Kuijs said India is the fastest growing economy in the Asia region. The impact of Covid on Asian economies are behind us and growth is in the process of picking up steam, he said.
"We did notice that Covid had a large impact on growth trajectories, especially in countries like India. India is recouping some of the lost ground and is growing faster than we had expected four years ago," Kuijs said.