Fitch warns of downgrade
“Policy slippage and/or mounting evidence of a structural decline in the trend growth rate, such as protracted relatively weak economic data, could cause the ratings to be downgraded,” it said.
“Our affirmation of the BBB- rating in June reflected India’s diversified economy and high domestic savings. An improved investment climate that supported greater infrastructure investment, and a sharp sustained decline in inflation, would support the rating.”
Earlier this year, Fitch and Standard & Poor’s had cut their ratings outlooks for India to negative, putting the country in danger of being the first of the BRICS group economies to be downgraded to junk status. However, Moody’s had last week said that the outlook on its rating for India is stable at ‘Baa3’, largely supported by the country’s credit strengths which include a large, diverse economy, strong GDP growth as well as savings and investment rates.
Fitch said India’s track record of delivering on fiscal policy goals is not encouraging. It has gone off track before with similar plans, such as that under the Fiscal Responsibility and Budget Management Act of 2003 or in the Thirteenth Finance Commission report of 2010. A loosening in fiscal policy ahead of the elections could further weaken India’s public finances and put pressure
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