India Insight

Fitch revises India outlook; recent views of other rating agencies

June 12, 2013

Fitch Ratings revised India’s sovereign rating outlook to “stable” from “negative” on the back of measures taken by the government to contain the budget deficit, it said in a statement on Wednesday. The rating agency had cut India’s outlook to negative in June 2012 and currently has a BBB- rating for the country.

“Fitch expects the government to broadly meet its FY14 budget deficit target of 4.8 percent of GDP (including privatisation receipts) and to gradually reduce the high level of public debt over the medium-term,” the rating agency said.

An acceleration in economic reforms that leads to a material improvement in potential growth rate consistent with stable consumer price inflation and external balance could be one of the factors that could trigger a positive rating action, it added.

Here are some recent comments from rating agencies Standard & Poor’s and Moody’s:

Standard & Poors – Outlook: negative, current rating BBB-

On May 17, the rating agency reiterated its negative outlook on India’s credit rating, warning of the need to follow through on reforms. This was a blow to a government that had pitched for an upgrade.

The agency listed high fiscal deficit and heavy government borrowing as the main drag on India’s rating, but said India’s position had improved over the past year. (Read more)

On Feb 28, after India announced its annual budget, the rating agency had said the budget would have no impact on the country’s sovereign credit ratings. It warned that there was potential for the government to exceed its budgeted spending. (Read more)

Moodys – Outlook: stable, current rating ‘Baa3′

On March 18, Moody’s said India’s high food inflation is a negative for the country’s sovereign ratings (Read more). Before today’s Fitch move, Moody’s was the only rating agency to have a stable outlook on India.

On March 4, the agency said in a report that India’s budget offers a “realistic” plan to meet the country’s fiscal deficit target, and should be a credit positive for its sovereign ratings. (Read more)

(You can follow Aditya on Twitter @adityayk)

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