Standard and Poor’s has shown enthusiasm about the prospects of the Indian economy, while also sounding a note of caution on potential stumbling blocks. Standard & Poor’s credit analyst Sharad Jain, the director in the Asia-Pacific Corporate and Infrastructure Ratings Group remarked that India has shown itself to be globally competitive in areas such as business processing outsourcing and information technology.

However, he also pointed out that “what is not so well known is that mobile telecommunications operators in India price a call at about 4-5 cents a minute, which is among the lowest worldwide. Given the enormous volumes, some of the larger players are expected to make money even at these prices.”

India’s main forte as of now is its large middle class population, which results in a booming consumer purchasing power that remains largely unfulfilled. This implies untold business opportunities. As for the challenges, he said that infrastructure is the single main issue. “The higher cost, and lower quality and reliability of electricity, road transport, rail transport, ports, and water supply continue to hamper sustained high economic growth in India.” What doesn’t help matters too much included frustrating labor laws and the continued dependence of the larger part of the economy on timely rainfalls.

There were a few notes of caution that Jain struck. One was for businesses, which, he said should manage their growths prudently, “guarding against the creation of excess capacity or aggressively leveraging balance sheets.” As for investors, they were advised not to get carried away by the current enthusiasm on India.

“Low interest rates and booming equity prices are partly responsible for the strong sentiment on India. However, these factors are often beyond the control of the government and businesses in India, and therefore can change very quickly,” said Jain.

Standard & Poor’s has a foreign currency rating of BB/Stable/B and local currency rating of BB+/Negative/B on India.