India to grow 5.5% this fiscal: Fitch

Written by fe Bureau | New Delhi | Updated: Apr 12 2014, 09:59am hrs
Warning of high fiscal deficit and inflation, Fitch Ratings on Friday affirmed India's sovereign rating at "BBB-" with a stable outlook as it expects the economic growth to accelerate from 4.7% in 2013-14 to 5.5% this fiscal and 6% in the next year.

While India's average growth rate in the last five years at 6.7% was faster than 3.2% for peers in the "BBB" rate category, Fitch said the country's combined fiscal deficit (centre and states) at 7.3% of GDP and government debt level of 64.7% of GDP was much higher than 2.5% and 40% for peers in the same category.

While the economic scenario will become clearer after elections, Fitch warned that India's ratings could be lowered if there was any deviation from the fiscal consolidation path, a prolonged period of disappointing GDP growth and a loose macro policy setting that would cause inflationary pressures to persist and current account to widen.

However, ratings could be upgraded if India continues a sustained fiscal consolidation plan that leads to a sharp decline in the ratio of gross general government debt to GDP. The implementation of far-reaching reforms can raise the potential growth rate and establish a credible low inflation environment, Fitch said.