|
|
TOUGH TARGET
|
Mumbai, Feb. 4: Global ratings agency Fitch today said its assessment of India would depend on the execution of recent reforms and the government’s fiscal consolidation plan.
Fitch said the country needed to unveil a credible medium-term fiscal consolidation plan, and the Union budget would be an important indicator.
The ratings agency has a negative outlook on India and a BBB- rating, which is the lowest investment grade.
“Public commitments and policy announcements by the Indian government so far in 2013 are encouraging signals that the authorities want to maintain the momentum towards fiscal consolidation and structural reforms generated since last summer. However, policy execution and the impact on trend growth will remain key to our ratings assessment,” Fitch observed.
The agency expressed concerns over India’s “patchy performance” on policy implementation. It noted that the general elections next year could impede the fiscal consolidation drive.
Besides adjusting fuel subsidies, the government has announced a five-year road map to reduce the fiscal deficit to 3 per cent of the gross domestic product (GDP) by 2016-17. It has opened the doors to foreign investment in multi-brand retail and raised the limit on foreign investment in bonds. Rail fares have been hiked, while oil companies have been allowed to increase diesel prices by small measures at regular intervals.
Fitch said recent data show that the authorities had made some progress in capping the fiscal deficit target at 5.3 per cent of the GDP for the current fiscal as a small surplus was recorded in December.
The ratings agency added that it would also observe the impact of reforms and broadly see how the macroeconomic outlook developed over time.
In December last year, Fitch had warned that the country’s sovereign rating could be downgraded if the government slipped on its fiscal consolidation and there was a structural decline in economic growth.
|
