Fitch warns of downgrade

Dec 04 2012, 01:19 IST
Comments 0
SummaryOur affirmation of the BBB- rating in June reflected India’s diversified economy and high domestic savings.

A week after rating agency Moody’s said the outlook for India is stable, Fitch on Monday warned that India’s sovereign rating could be downgraded if the government loosens fiscal policy in the run-up to the 2014 elections or sees a prolonged slowdown in economic growth.

“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 on the ratings, it said.

Factory growth at 5-month high

mumbai: India’s manufacturing sector grew at its fastest pace in five months in November, boosted by strong export orders and a surge in output, according to the HSBC Manufacturing PMI survey. The index which measures the business activity of factories, stood at 53.7 in November, up from 52.9 in October.

Morgan Stanley raises GDP forecast to 5.4%

MUMBAI: Morgan Stanley has raised India’s FY13 GDP growth forecast to 5.4 per cent from 5.1 percent, citing better-than-expected GDP growth for the September quarter and also the stabilisation in non-agriculture growth indicators.

Ads by Google

More from Business

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...