Fitch repeats rating threat; Govt says 'nothing to worry'
Mumbai: Rating agency Fitch Tuesday warned of a downgrade in India's sovereign rating in the next 12-24 months citing slowing GDP growth and weak public finances.
The Finance Ministry, however, played down the issue, saying Government is on the right direction on fiscal front.
"Back in the middle of June, we had placed negative outlook on India's sovereign rating, which currently stands at BBB-. The negative outlook suggests that there is a ... Likely chance of revising the rating downward from BBB- in the 12-24 months," Fitch said in a conference call from Tokyo.
The Finance Ministry said it is moving on the right track and is confident of restricting fiscal deficit to 5.3 percent of GDP this fiscal.
"We are not worried. We have been saying we are on the right track. But people still distrust us and ask whether we will able to achieve fiscal deficit target ... We will adhere to fiscal consolidation roadmap," Economic Affairs Secretary Arvind Mayaram told PTI in Delhi.
He pointed out that the Government has taken a number of steps to restrict the gap between expenditure and revenue collection to 5.3 percent of GDP during FY13, and added the process would continue in the subsequent years as well.
Fitch is the second global agency to reiterate its warning to junk the sovereign rating after its larger peer S&P, which in April and June, had warned of further downgrades which would put India into junk status from the current lowest investment grade rating of BBB-. But another agency Moody's has a stable outlook for the Asia's third largest economy.
Fitch also expressed its concerns over the country's economic and fiscal outlook.
"The negative outlook indicates concerns about the deterioration in the economic and fiscal outlook, particularly about the short slowdown in growth, persistent inflationary pressure and weak public finances," Fitch sovereign rating analyst Art Woo told a conference.
While the Indian economy has been expanding at the slowest pace in the past one decade, inflationary pressure still persists with wholesale price-based inflation hovering at 7.24 percent in November.
Pointing out at macroeconomic indicators, Fitch said the macroeconomic trends have been a bit disappointing with real GDP growth slowing down to 5-5.5 percent in previous quarters and wholesale price inflation remaining elevated.
In the first half of FY13, the GDP clipped at a poor 5.4 percent, and the government expects to close the fiscal year under 5.7 percent.
The agency said India's higher current account deficit numbers, which touched 5.4 percent for the second quarter with fiscal deficit touching 80 percent in the first eight months of this financial year, remained areas of concern.
However, Fitch lauded the Government's recent reform measures as "the steps in the right direction".
"There have been number of noteworthy developments... which were initiated in September and October. On the positive side...Measures taken by the Government to increase foreign investment in a number of sectors, particularly in the multi- brand retail, are steps in the right direction," Woo said.
He, however, said given the track-record of 'policy paralysis' of the Government, execution risks remain.
The rating agency noted that upcoming Budget would indicate the Government's commitment to fiscal consolidation, which will determine the macroeconomic health in the future.
More from India
More from World
More from Sports
More from Entertaiment
- Cortana for Android available for public beta in US
- Xiaomi Redmi 2 Vs Redmi 2 Prime: Specification comparisons
- Middle class woes to continue, wholesale onion price shoots up to Rs 57 per kg
- Alleged land encroachment in Greater Noida: HC asks DM to decide representation in 3 months
- Watch: Review of Mahindra TUV300