HYDERABAD: Standard & Poor's (S&P), a global credit ratings, indices and risk evaluation firm, has asked India to continue to work on fiscal consolidation that would help it bring deficits below the 8 per cent level on a sustained basis.

The agency, which upgraded India's rating from stable to positive, has, however, cautioned that the financial weakness rating of the country was worst among the sovereigns, leaving scope for vulnerabilities to any decline in growth rates or increase in the interest rates.

Releasing the ratings on the sidelines of the 39th annual general meeting of the Asian Development Bank here on Friday, Ping Chew, Director (Sovereign, International Public Finance and Financial Services Ratings) for Asia, said financial consolidation would help bring down the high debt burden of the country. Reduced deficit and debt burden, coupled with strong growth trajectory, could make India move on to the investment grade.

The rating agency had assigned BB+ to India, giving a positive outlook. The next grade, BBB+ considered to be a benchmark grade, would make India investment grade. Despite numerous setbacks in economic policies, like the inability to sell off state enterprises and liberalise the labour markets, India could register some success in reforming the economy.

S&P had retained its growth forecasts for all the major economies in the Asia-Pacific region, notwithstanding the rising oil prices and interest rates, with a caution that an oil supply shock could impact the largely good picture.

S&P also projected further increase in interest rates in many Asian countries, but this trend was unlikely to choke off economic growth in the region, he added.

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