Fiscal consolidation has continued to move ahead, narrowing the gulf between India and many of its rating peers, Fitch Senior Director Paul Rawkins said in the report.
India’s general government deficit is set to fall to 5.6 per cent of GDP in fiscal year 208, as compared to 10 per cent of GDP in 2001-2002, Fitch said in a report on Saturday
Fitch also affirmed country’s foreign and local currency Issuer Default Ratings (IDR) at ‘BBB minus’, reflecting a stable outlook. Fitch which had upgraded India to investment grade in 2006, has retained the grade, though India has recorded 9.4 per cent GDP growth in 2006-07 and has increased its foreign exchange reserves to around $260 billion.
“India’s growth story remains firmly intact, reinforced by strong net capital inflows and further advances in India's external solvency and liquidity indicators".
Fiscal consolidation has continued to move ahead, narrowing the gulf between India and many of its rating peers, Fitch Senior Director Paul Rawkins said in the report.
Good performance
Even as the tight monetary policy regime has helped to curb inflation at about 3 per cent, external pressures on liquidity, coupled with the skyrocketing asset prices continue to pose a challenge, it said. India’s sustainable growth and the ability to support high levels of public debt, has helped the country achieve a steep rise in the Gross Domestic Savings (GDS) and investment ratios, report said. Despite high oil prices, India has succeeded in containing its current account deficit to 1-2 per cent, owing to the comparable increases in savings and investment, the Fitch report said.Though, sudden reversals in portfolio equity inflows can't be ruled out, the comfortable forex reserve position, will help the country to manage the risk, it added.
Although Fitch in its analysis pointed out that “one year on, the growth story remains firmly in-tact, reinforced by strong net capital inflows and further advances in India’s external solvency and liquidity indicators,” it refrained from upgrading country’s rating. Affirming the rating, the strong growth will be critical to the country and also the faster reform. Fiscal consolidation will need to remain at the forefront, it added.
