With India’s sovereign rating stuck at the lowest investment grade even after implementing a number of reform measures, the finance ministry on Tuesday asked Fitch to explain the weightage given to different reforms and economic parameters in assigning ratings.
In the latest Economic Survey, chief economic adviser Arvind Subramanian had slammed global rating agencies for following “inconsistent” standards while rating India vis-a-vis China.
In a post-Budget meeting with analysts of the global rating agency, the ministry officials explained that the 3.2% fiscal deficit target set for FY18 was not much of a deviation from the consolidation path.
Finance minister Arun Jaitley has projected a rather modest 12.3% increase in tax receipts and a very economical 6.6% rise in the budget size for FY18, compared to a 17% and a 12.5% rise, respectively, in FY17. He also set fiscal deficit target at 3.2%, a modest relaxation from the initial target of 3%, to stimulate the economy.
In turn, Fitch was understood to have said they give more weightage to structural reforms in medium- to long-term. The agency also enquired about the status of bank non-performing assets and labour reforms in the country.
In July 2016, Fitch had retained India’s sovereign rating at “BBB-“, the lowest investment grade, with stable outlook. Weak fiscal balances, India’s Achilles’ heel for years, continue to constrain its ratings, it had said. In the FY18 Budget, Jaitley has announced a roadmap to bring down the debt-GDP ratio to below 60% from nearly 69% now.