JOIN USFinMin pitches for rating upgrade, will check fiscal deficit
India on Monday assured rating agency Moody's Investors Services about the government's commitment to meet its fiscal deficit target of 4.1 per cent for the current financial year ending March.
“They (Moody's) have concerns about fiscal deficit. We believe that we will be able to maintain the targets that we have put in place because growth is already now back. Even IMF (International Monetary Fund), World Bank projections are taking the growth outlook upward. So, there is going to be buoyancy in the revenues. So, that concern is less than what it was earlier," Finance Secretary Arvind Mayaram said after meeting Moody’s officials.
Moody’s has assigned 'Baa3' rating on India, with a stable outlook, which suggests the possibility of an upgrade.Monday's talks were part of a series of meetings with officials from various rating agencies. Last month, the ministry officials had met officials from ratings agency Standard & Poor's.
India's gross domestic product in the April-June period grew at the fastest rate in nine quarters at 5.7 per cent compared with 4.6 per cent in January-March and 4.7 per cent in the same period a year ago.
According to Moody's, the rating “reflects high domestic savings and adequate foreign exchange reserves and the challenges posed by large fiscal deficits, recurrent inflation and weak infrastructure.”
The finance secretary also expressed optimism regarding the government's divestment plan for the current financial year to the Moody's officials.
“Because the markets are doing so well we expect the divestment programme will get us more than we projected earlier. Hence, we believe that we will be able to maintain the fiscal deficit where it is projected," he said.
The finance ministry also assured the ratings officials of a bottoming out of the non-performing assets of banks.
Mayaram said inflation is a concern but they had assured Moody's officials of requisite measures by the government and the availability of adequate food grain stocks.
"Inflation is also a concern but we have explained to them that we are taking care of the requirement of stocks. Monsoon is below normal and production is marginally less than what it was earlier, although all evidence show that it should not be so, then our stocks are adequate to take care of any contingencies," he said.
He added that the government has set up an Expenditure Management Commission which would look at broad contours of subsidy rationalisation.
Improved performance of mining, manufacturing and services sector has pushed India’s economic growth rate to two-and-half years high of 5.7 per cent in the April-June quarter, a development which the Finance Ministry expects to continue for rest of the fiscal.