In this photo released by the Indian President’s office, India's new Prime Minister Narendra Modi, second right, greets other leaders as he arrives for his inauguration in New Delhi, India, Monday, May 26, 2014. Modi took the oath of office Monday in the massive forecourt of the country's presidential palace, a moment made especially historic by the presence of the prime minister of archrival Pakistan. Modi's inauguration is the first to which India invited heads of state from across South Asia. (AP Photo/Indian President’s office)

Mumbai - The strongest electoral mandate in three decades is fuelling optimism that India’s new government will revive growth and avert a junk debt rating.

Bond risk of Indian companies slumped to the lowest in a year after Narendra Modi’s Bharatiya Janata Party (BJP) swept polls this month with the biggest majority since 1984.

The average cost of protecting the debt of seven firms against non-payment for five years using credit-default swaps fell to 223 basis points, data provider CMA said.

Modi took oath as prime minister in New Delhi yesterday.

Goldman Sachs said that, while it expected his government to revive stalled projects, boost investment and cut some subsidies, improving the budget deficit would take at least a year.

Standard & Poor’s warned in November last year that India might lose its BBB- investment grade, first awarded in 2007, should the new administration fail to revive growth from near a decade low.

“The downgrade pressure has been pushed aside for now,” DR Dogra, the managing director of CARE Ratings in Mumbai, said on Friday. “I don’t think there will be any such speculation for a reasonably long time.”

Credit default swaps for State Bank of India, the nation’s largest lender and regarded by some investors as a proxy for the sovereign, reached 188 basis points on Friday, the lowest in a year, CMA data show. Contracts protecting Reliance Industries, India’s second-largest company by market value, were at a one-year low of 164 basis points. The cost of insuring Bank of China’s debt is at 144 basis points, close to a one-month high.

The BJP won 282 of the 543 seats in the lower house of parliament and controls 336 seats with its allies, results published by the Election Commission show. The mandate would give the government a freer hand in implementing policies that could help improve India’s sovereign credit metrics, Kim Eng Tan at Standard & Poor’s said. – Bloomberg