Fitch won’t give up on its negative outlook for India

The comments from Fitch sovereign analyst Art Woo sent the rupee lower, reinforcing worries that India is still at risk of losing its investment-grade rating from the credit agency.

Although Woo described India's fiscal and economic reforms last year as a "step in the right direction," he also expressed concern that the government would miss its fiscal deficit target for the year, while saying the structural reform process was "sluggish."

"The negative outlook reflects Fitch's concerns over deterioration in India's economic and fiscal outlooks, particularly a sharp slowdown in growth, persistent inflationary pressures and weaker public finances," Woo said in a conference call.

The Indian economy extended its long slump in the September quarter, growing only 5.3%from a year earlier, below the 5.5% expansion seen in the three months to June, keeping it on track for its worst year in a decade. Woo called growth "a bit disappointing" at a time of elevated wholesale price inflation, despite acknowledging signs of stabilisation in the near-term for both indicators.

The Fitch analyst also expressed concern about India's record current account deficit of 5.4% in the September quarter. Fitch and Standard and Poor's last year cut their ratings outlooks for India to "negative", putting India in danger of being the first of the BRICS grouping of fast-growing economies to be downgraded to "junk" status. Fitch and S&P also affirmed the country

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