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S&P will look at ongoing reforms before taking action: FinMin

Last Updated: Friday, October 12, 2012 - 21:16

Tokyo: Global rating agency Standard and Poor's will look at economic reforms being undertaken by the government before taking any rating action, said top Finance Ministry official.

"Reform is a continuous process. We are moving ahead with several reforms ... You have heard about reforms regarding urea price recently. Reforms are on way and many more will be coming. And I am confident, Standard & Poor's will look at them and then make an assessment", said Arvind Mayaram, Secretary, Department of Economic Affairs in an interview to CNBC TV18.

He said this in response to a question on the recent threat of S&P to cut India's credit rating in 24 months to junk grade if it failed to carry out requisite economic reforms. Mayaram is here to participate in the IMF-World Bank annual meetings.

In the past few weeks, the government has taken a slew of reform measures, including opening the multi-brand retail chain to foreign investment up to 51 percent and hiking FDI investment limit in insurance and pension to 49 percent. It also liberalised FDI norms for aviation and broadcasting sectors.

The rating agency in its report on October 10 had said that there was one-in-three likelihood of rating downgrade for India if "the country's economic growth prospects dim, its external position deteriorates, its potential climate worsens, or fiscal reforms slow".

Finance Minister P Chidambaram had yesterday said, "I don't think there is a serious threat of a downgrade but we take the talk of a downgrade seriously. We will engage with rating agency and convince them that India does not deserve a downgrade."

S&P in its report had also said that it could improve rating outlook from negative to positive if "the government implements initiatives to reduce fiscal deficit, improves its investment climate, and increases growth prospects".

The rating agency in April had changed the rating outlook of India from stable to negative, reflecting the possibility of a downgrade.

The country's present rating is BBB-(Negative), the lowest investment grade rating, and a downgrade would result in India's rating slipping to junk status, raising the cost of overseas borrowings by domestic corporates.

India's economic growth rate during 2011-12 slipped to a nine year low of 6.5 percent. As per the estimate of the rating agency, the growth in the current could slip to 6 percent.

Commenting on deferrement on initial public offer of Rashtriya Ispat Nigam (RINL) for the third time, Mayaram said, "Even if it is deferred, I do believe that we are going to be back on stream by the end of this month or some time early in the next month."


First Published: Friday, October 12, 2012 - 21:16
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