CareEdge announces entry into Global Scale Ratings with launch of Sovereign Ratings for 39 Countries; Assigns BBB+ Rating to India

CareEdge Global IFSC Ltd, a subsidiary of CARE Ratings Ltd, one of India’s leading credit rating agencies, has today unveiled its report on Sovereign Ratings of Global Economies, assigning sovereign ratings to 39 countries. The rating agency has assigned long term foreign currency (LTFC) rating of CareEdge BBB+ to India. With this, CareEdge has become the first Indian credit rating agency to enter the Global Scale Ratings space, through its subsidiary, CareEdge Global IFSC Limited.

CareEdge Global has assigned a long-term foreign currency rating of BBB+ to India, based on the resilient post-pandemic rebound of the Indian economy and increased focus on infrastructure investment. The outlook also factors the projected lowering in the general government debt, albeit gradually, aided by healthy nominal GDP growth and continued focus on fiscal consolidation. CareEdge projects general government debt to GDP to reduce to 78% by FY30 and further to 73.5% by FY35 from around 80% level currently. However, it believes that the still elevated general government debt and weak debt affordability remain the key credit constraints.

According to CareEdge Global, India’s credit assessment gains from its large and diverse economic structure as well as its healthy growth performance. CareEdge expects GDP growth in the range of 6.5-7% in the next few years. Additionally, India’s high foreign exchange reserves and low levels of external debt contribute to a favourable external position supporting its overall credit profile. However, these positives are balanced against high general government debt and weak debt affordability. The country has a low per capita income and high oil import dependency (~85%), which increases its vulnerabilities arising from global oil price shocks.

Speaking on the occasion, Mehul Pandya MD & Group CEO, CareEdge said, "This is a significant milestone for us in our journey towards becoming a global knowledge-based institution. As India's economic influence grows, it is both timely and appropriate for an Indian company to enter this domain. We are conscious of the significant responsibility that comes on our shoulders with this foray and are fully committed to provide independent and unbiased assessments. CareEdge Ratings brings with it a nuanced understanding of emerging economies - a perspective that is invaluable in today's complex global economic environment.

We are convinced that it is very important to have transparency in methodology of sovereign ratings, particularly in assessing the growth potential and investment needs of economies. This reflects in the ratings assigned by us.”

In its first sovereign rating action, CareEdge Global has assigned the following ratings to 39 countries: AAA to Germany, Netherlands, Singapore and Sweden; AA+ to Australia, Canada and USA; AA- to France, Japan, Korea, UAE and UK; A+ to Portugal, A to China and Spain; A- to Chile, Malaysia and Thailand; BBB+ to Botswana, India and Philippines; BBB to Indonesia, Italy and Mauritius; BBB- to Mexico, Morocco and Peru; BB+ to Brazil, Columbia, Greece and Vietnam; BB to South Africa; B+ to Turkey; B to Nigeria; B- to Ecuador and Egypt; CCC+ to Bangladesh; CCC to Argentina and D to Ethiopia.

Revati Kasture, Executive Director, CareEdge Ratings said, “Our methodology is robust and ensures equal treatment of both developed and emerging economies by using consistent thresholds across all countries. The ratings generated through our approach will support investors and enrich the range of perspectives on different countries and markets.”

CareEdge Sovereign Ratings methodology involves analysis under five broad pillars to determine a sovereign’s creditworthiness. These pillars are Economic Structure & Resilience (25% weightage), Fiscal Strength (25% weightage), External Position & Linkages (16.67% weightage), Monetary & Financial Stability (16.67% weightage), and Institutions & Quality of Governance (16.67% weightage). The assessment of each of these pillars is based on the consideration of historical and expected future trends of several parameters.

Rajani Sinha, Chief Economist, CareEdge Ratings said, “India has demonstrated strong reform commitment in recent years with the implementation of several initiatives such as Digital India, the Production Linked Incentive scheme, PM Gati Shakti etc. The government’s focus on improving the economy’s competitiveness, boosting foreign trade, and increased focus on infrastructure investments are positives. Additionally, the demographic dividend presents a crucial opportunity to harness India’s growth potential.”

The report on Sovereign Ratings of Global Economies was unveiled in a mega event held at GIFT City, Gandhinagar, India. Many eminent personalities from regulators, corporates and policy makers were present during the launch, including KV Kamath – renowned corporate leader in India, Ashishkumar Chauhan – MD & CEO, NSE, and Sanjeev Sanyal – Member, EACPM.

The entire report on Sovereign Ratings of Global Economies can be accessed at www.careedgeglobal.com