Mumbai/New Delhi, May 2 (PTI) Citing weak fiscal position, US-based agency Fitch today kept India’s sovereign rating unchanged at ‘BBB-‘, the lowest investment grade with stable outlook assigned to the country more than a decade ago.
The leading rating agency, however, expects India’s growth rate to accelerate to 7.7 per cent in fiscals 2017 and 2018, from 7.1 per cent in fiscal 2016.
The government and some commentators in India have been questioning ratings assigned by global agencies arguing the country’s economic fundamentals have improved significantly over the last few years, but not have taken into account by those rating firms.
The government’s ‘Economic Survey 2017’ too has slammed the agencies for following “inconsistent” standards while rating India vis-a-vis China, saying they have not taken into account reforms measures like GST, which is a “poor” reflection on their credibility.
Fitch had last upgraded India’s sovereign rating from BB+ to BBB- with stable outlook on August 1, 2006. Later, it changed the outlook to negative in 2012 and then again to stable in the following year, though it kept the rating unchanged at the lowest investment grade.
In its note on rating, Fitch said: “The sovereign ratings at BBB- balance a strong medium-term growth outlook and favourable external balances with a weak fiscal position and difficult business environment”.
It also added that the business environment is likely to gradually improve with the implementation and continued broadening of the structural reform agenda.
The NDA-government has been consistently rolling out its ambitious reform agenda for almost three years and remains committed to continued reforms, the New York headquartered agency said.
“The impact of the reform programme on investment and real GDP growth will depend on how it is implemented and the extent to which government continues its strong drive to improve the still-weak business environment,” the agency said.
Fitch expects structural reforms to increase growth, along with higher real disposable income supported by implementation of the seventh pay commission recommendations and an average monsoon.
The stable outlook, it said, reflects the assessment that upside and downside risks to the ratings are broadly balanced.
Eminent banker Deepak Parekh has wondered how a country with such “strong fundamentals” on both economic and political fronts can be rated so low.
India continues to be rated ‘BBB-‘ — just a notch above the junk grade and lowest among investment grade ratings — by most of the global credit rating agencies.
Ratings are considered important as they help domestic companies raise overseas funds at competitive rate.
This is published unedited from the PTI feed.