Mumbai, Feb. 11: Fitch Ratings today affirmed India’s long-term foreign currency at BB and local currency ratings at BB+ with a stable rating outlook. The short-term foreign currency rating is B.
The international credit rating agency said that the affirmation and outlook balances sharp improvement in external accounts during the past two years with an ongoing deterioration in the health of public finances that shows little sign of being addressed in the near future.
It may be recalled that earlier Moody’s had upgraded India’s country ceiling for foreign currency debt and bank deposits following an improvement in the external liquidity position.
Fitch said the divergent trends between fiscal and external accounts have been accentuated within the past year. India’s external accounts have been bolstered by the country’s current account surplus, a steady growth in software and merchandise exports, rising NRI deposits as well as a pick-up in non-debt creating foreign investment flows.
Following this, the country’s international liquidity position has strengthened with reserves (excluding gold) rising by $ 18 billion between March 2002 and January 2003, it said.
However, growing prospects of war could expose India’s dependence on oil imports and overseas workers remittances from West Asia, it warned.
The rating agency further added that continued back peddling on economic reforms and fiscal profligacy resulting in sub-optimal growth and rising government debt could lead to a downward adjustment of the local currency rating.