India Debt Rating Raised to Investment Grade; Economy to Grow at Record 9%

India's debt rating was raised to investment grade by Standard & Poor's for the first time in 14 years . Moody's Investors Service raised its rating to investment grade in January 2004, followed by Fitch Ratings in August 2006, reports Bloomberg.

Higher debt rankings will also reduce borrowing costs for companies in India, sustaining the average 8% growth of the past four years which is the fastest since the nation's independence in 1947, in Asia's fourth largest economy. 

The rating upgrade will help India narrow the gap in manufacturing, which makes up 17% of India's economy. 

Some of India's key economic and investment metrics:

  • Foreign investors bought a net $8.31 billion in Indian stocks in 2006, following a record buying of $10.7 billion in 2005. 
  • Lending by Indian banks to consumers and companies has been growing at more than 30% each year in the past three years, the fastest on record since 1971. 
  • The lending has fueled inflation to a two-year high of 6.12% this month. 
  • India's foreign-exchange reserves rose to a record $178.13 billion this month, the world's seventh largest reserve of foreign exchange.
  • India's per-capita income has doubled in the last nine years. The number of households earning an annual income of at least $10,000 is rising more than 20% a year, according to McKinsey & Co.
  • Only about 30 million people pay taxes in India, home to 1.1 billion people, as farmers' incomes are exempt from taxes.
  • Company tax collection rose 51.8% in the 9 months to Dec. 31, almost double the rate forecast by the government.

Finance Minister Palaniappan Chidambaram expects the economy to grow 9% in the year ending March 31, the fastest pace on record.

Chidambaram said this month the government's budget deficit will shrink to 3.8% of gross domestic product in the year to March 31, the narrowest in a quarter century, from 4.1% in the previous financial year. 

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