Rising Tensions: India's Economic Growth in Limbo

S&P Global Ratings warns of heightened credit risks due to India-Pakistan tensions, stressing that while no immediate credit impacts are expected, prolonged military conflict could harm economic stability. Both countries are urged to de-escalate quickly to avoid exacerbating sovereign credit pressures.

S&P Global Ratings raised alarm on Thursday about the escalating hostilities between India and Pakistan, suggesting these tensions could adversely affect the credit metrics for both nations. Any further escalation might put pressure on the sovereign credit support of these countries.

The rating agency, which assigned India and Pakistan ratings of 'BBB-' and 'CCC+' respectively, anticipates high tensions over the coming weeks without immediate impacts on sovereign ratings. However, significant military activities are possible, S&P noted, forecasting eventual de-escalation.

Following terrorist attacks in Pahalgam, India's military retaliated by targeting terror sites in Pakistan and PoK. Pakistan's leadership warned of a strong counter, despite expressing readiness for de-escalation. The ongoing tensions could derail economic stability efforts in both countries, affecting investor confidence and economic growth.

(With inputs from agencies.)