The sovereign credit ratings on India reflect the country's sound external profile and improved monetary credibility. These factors, combined with strong democratic institutions and a free press, both of which yield policy stability and predictability, underpin the investment-grade rating on India. These strengths are balanced against vulnerabilities stemming from the country's low per capita income and weak public finances. India's governing parties have made progress in building consensus on a passage of laws to address long-standing impediments to India's growth. These include strengthening the business climate (such as through simplifying regulations and improving contract enforcement and trade), improving labor market flexibility, and reforming the energy sector. We also observe some progress in comprehensive tax reforms through the likely introduction of
