The government on Wednesday chose to play down Standard and Poor?s (S&P) warning on a possible India downgrade saying there was no case for one.
Arvind Mayaram, secretary, Department of Economic Affairs, said a case for a downgrade didn?t exist since the government would meet its commitment to rein in both fiscal and current account deficits for FY14.
Speaking to the media on the eve of the G-20 summit in St. Petersburg, Russia, Mayaram said, ?The finance minister has committed to containing the fiscal deficit at 4.8% of GDP and the current account deficit at 3.7% of GDP and this will be met.?
Mayaram said the government might even surprise the country with ?a less than 3.7% CAD?. The secretary added that growth would pick up in the third and fourth quarters of the year with the impact of the $30-billion worth of projects, cleared by the CCI, kicking in.
?GDP growth in Q1FY14 was 4.4% because the fiscal deficit was tightened by 120 basis points last year,? he said.
On Tuesday, S&P had said the chances of India being downgraded were more than one in three. Currently, India is rated BBB- and any downgrade would reduce the country?s rating to junk status.
Defending the sharp depreciation of the rupee, which has been among the worst performing currencies globally in recent months, the economic affairs secretary said the currency had been hit because of the high current account deficit.
?The perception of a high CAD is contributing to the weakness in the currency,? he observed.
In the context of the country importing more crude oil from Iran to help conserve foreign exchange, the secretary said India would work with the sanctions imposed.
Mayaram hoped the G-20 summit would see a consensus evolve on infrastructure funding, a subject on which there had been some disagreement.
?The World Bank had been mandated to prepare a working paper and a draft may be presented at the summit,? he said. Dismissing a view that emerging nations such as India might suffer from the new rules being framed to curb tax evasion by large multinational corporations, Mayaram observed there was ?no question of going after anyone?.
He observed that the sole objective of the OECD?s recommendations on Base Erosion and Price Shifting (BEPS) was to ensure that companies paid the statutory taxes so that the concerned countries did not lose out on tax revenues.
The OECD is expected to come up with an action plan aimed at modernising international tax instruments and drawing up standards to respond effectively to, and counter BEPS, in spaces such as transfer pricing and international taxation.
The new guidelines will be important for India as there have been several disputes between the local tax authorities and multinationals relating to transfer pricing.
Much like other emerging economies, India, too, would be looking for some predictability on the US Federal Reserve?s move to taper its bond purchases or QE3, Mayaram observed, adding that there could be spillover effects of such a withdrawal and that these needed to be calibrated.
?There should be a strong statement on the concerns of a spillover and the determination to work towards minimizing its effect,? the secretary said.
Mayaram also hoped that India?s concerns on the roll-back of trade agreements by some emerging nations, would be addressed, with these countries standing by the agreements.