'Case exists for rating upgrade'

The Finance Ministry feels there is a case for a rating upgrade of India by at least a notch or so and agencies like Standard & Poor’s and Fitch would be conveyed this view when they visit India next month.

“I strongly believe there is a case for S&P and Fitch to upgrade. Even if it is one only notch or two notch above, but certainly there is no case for a downgrade,” DEA Secretary Arvind Mayaram said.

He said the two agencies are scheduled to come next month when the Finance Ministry will present the state of the economy to them and highlight steps  taken to contain fiscal deficit. “We are going to have discussions. Fitch and S&P will come,” he said.

Both S&P and Fitch had earlier threatened to downgrade India’s credit rating as an aftermath of the expansionary policy which led to a rising fiscal deficit. After the presentation of Union Budget, S&P and Fitch had said India’s sovereign rating was unaffected but had warned that policy execution and controlling subsidies would be the key risks to look out for during the year.

“With elections due in a little more than a year, the adherence to fiscal consolidation remains encouraging,” Fitch had said. S&P termed the Budget “prudent”.Moody’s called it “credit positive.”

S&P currently rates India as ‘BBB-’, lowest in the investment grade. Any further downgrade will push India’s rating to the junk status, making it difficult and costlier for Indian entities to borrow funds overseas.

Meanwhile, in a tempered note, India Ratings, Fitch’s Indian arm, said that the worst may be over for India’s economy but uncertainty still lies ahead, and qualitative fiscal reforms are necessary to ward off any further bad news.

“This is the bottom of the pit (for the Indian economy). Whether we dig further or find steps to climb up, that is where the uncertainty lies,” its MD & CEO Atul Joshi said.

“If handled properly and executed well, then there is good news ahead,” he added. 

He however refused to comment on whether the risks still remain about a possible downgrade in India’s sovereign credit rating to ‘junk’ status, or  prospects have improved for an upgrade.

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