Summary:
The ‘research update’ document from S&P on Kerala sheds light on the areas where the state is weak or performs less than adequate.On Tuesday, S&P had rated Kerala State as ‘BB’ grade, which belongs to the highest rating tier within the high yield bonds. Typically, the yields on these bonds are high as the investors should be compensated for the high risk.“Our ratings on Kerala reflect the Indian state's weak budgetary and debt metrics driven by its large spending on socio-economic welfare to support a low-income economy. The state's capacity to self-finance is challenging and Kerala has opted to increase debt in the short term to deliver on basic services. In our view, the state's policymakers are of high calibre and have extensive experience in central government and state government administration. However, it is a shade or two below the prime bonds and falls into the ‘speculative’ or ‘high risk’ category..