New Delhi: India's high foreign exchange reserves and low levels of external debt are contributing to its overall credit profiling, said CareEdge Ratings on Thursday, as the rating agency assigned 'BBB+' sovereign ratings to India.

Also, the BBB+ rating to India was based on the resilient post-pandemic rebound of the Indian economy and increased focus on infrastructure investment.

The rating agency's outlook also factors the projected lowering in the general government debt, and continued focus on fiscal consolidation.

As per CareEdge Global, India's external debt to GDP has been constantly declining since 2020 -- 21.1 per cent in 2020, 19.9 per cent 2021, 19.0 per cent in 2022, and 18.7 per cent in 2023.

The rating agency, through its subsidiary CareEdge Global IFSC Ltd, has forayed into the business of giving sovereign ratings. on Thursday, it has unveiled its report on 'Sovereign Ratings of Global Economies', assigning sovereign ratings to 39 countries, including India.

According to CareEdge, India's credit assessment gains from its large and diverse economic structure as well as its healthy growth performance.

At the same time, it noted that India has a low per capita income and high oil import dependency (85 per cent), which increases its vulnerabilities arising from global oil price shocks.

"The economy continues to lag in global competitiveness and has a low per capita income," it said in the report.

India also enjoys a favorable demographic structure.

Going ahead, the report asserted that there is a need to increase investment in human capital and create more employment opportunities to fully reap the demographic dividend.

"The government's focus on improving the economy's competitiveness, boosting foreign trade, and promoting capex-led growth are positives. Additionally, the demographic dividend presents a crucial opportunity to harness India's growth potential," it said.

India is a large economy with a nominal GDP of USD 3.6 trillion in 2023.

Economic growth has remained healthy, rising by 8.2 per cent in 2023-24 and is projected to remain around 6.5-7 per cent over the next five years.

"The government's continued focus on the development of infrastructure and resolving logistic bottlenecks bodes well for boosting the overall growth potential," it said.

The emphasis on digitalization by India also remains a positive for shaping transformation.

"The government's focus on digitalisation and e-governance initiatives is a positive for improving governance and promoting transparency. Furthermore, India currently is at a crucial juncture given its favorable demographic composition," it said. However, skill development and job creation must be prioritized for India to reap the full benefit of its demographic dividend, it added.

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