Expectations of a sovereign rating upgrade are set to see the rupee rise. Currently, Standard & Poor (S&P)'s has a BBB' rating on India, the lowest in the investment grade, with a negative outlook.
An upgrade will help India attract more foreign flows and, therefore, strengthen the rupee.
According to a communication by S&P, the five key factors on which its sovereign credit analysis is based are institutional and government effectiveness and security risks; economic structure and growth prospects; external liquidity and international investment position; fiscal performance and flexibility; and debt burden and monetary flexibility.
"Most leading indicators are showing all-round improvement. Also, the government is committed to fiscal consolidation. Compared to other emerging market economies, our house is more in order. Foreign exchange reserves have gone up and the government securities market is being reformed," said Rupa Rege Nitsure, chief economist and general manager, Bank of Baroda.
src:sify.com