Mumbai, May 19: Fitch today affirmed India’s foreign and local currency ratings at ‘BB+’ with a stable outlook.

However, a high fiscal deficit position has prevented the country from achieving an investment-grade rating in the near term, the agency added.

“Despite a solid external liquidity and a declining foreign debt burden, India’s high fiscal deficit prevents it from achieving an investment-grade rating in the near term,” Fitch said.

Future ratings would hinge on the progress made by authorities to improve public finances.

“In essence, India's weak public finances have become a binding constraint on its sovereign ratings, ” Shelly Shetty, senior director of Fitch's soverign rating team, said.

“Faster deficit reduction will place public debt on a stronger footing and encourage a virtuous cycle of lower interest rates, greater private investment and higher economic growth, all of which will support a higher sovereign rating,” she said.

The general government debt stock of over 80 per cent of GDP is significantly higher than the ‘BB’ median and a further build-up in public debt will undermine the ability of the government to respond to shocks.

With the rapid build-up in forex reserves to $137 billion at the end of 2004-05, India is estimated to have turned into a net external creditor, it said. A strong export growth has placed external debt ratios on a “solid downward trajectory”.

However, Shetty said the country is expected to record current account deficits in the coming years.