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Post-Budget meet likely next week with Fitch, to be followed with S&P and Moody’s
Finance ministry officials are likely to meet representatives from global rating agencies from March 12, to push for a country upgradation.
Among the agencies to be so lobbied are Fitch Ratings, Standard and Poor’s (S&P) and Moody’s Investors Service. Officials will formally apprise them of major reform measures announced in the Union Budget. At present, all these three rating agencies have assigned India their lowest investment grade.
A team led by Finance Secretary Rajiv Mehrishi and Chief Economic Advisor Arvind Subramanian is likely to meet Fitch on March 12, followed by Moody’s and S&P in April sometime, senior officials told Business Standard.
The agencies concerned have already criticised Finance Minister Arun Jaitley’s announcement on delaying the earlier fiscal consolidation schedule by a year. The Union Budget, presented last Saturday, was unlikely to have a positive outcome on India’s sovereign credit, they’d said.
S&P has already ruled out a rating upgrade for at least a year. Fitch had said the announcements on structural reforms and increased public spending in infrastructure were positive but the “less aspiring” fiscal consolidation strategy was a negative for ratings.
However, on Thursday, Moody’s said the new inflation targeting mechanism between the Reserve Bank (RBI) and the central government was a “credit positive” move and would make the central bank’s monetary policy tools much more effective. However, it had also said the Budget would not change India’s sovereign rating.
The government team is to summarise the major reform measures, tax and policy announcements in the Budget, with emphasis on the Rs 70,000 crore of additional public spending on infrastructure, the promise of universal insurance and pension coverage, increased resources for states, and the monetary policy framework agreement between the ministry and RBI.
The officials will explain the reasons for budgeting the fiscal deficit for 2015-16 at 3.9 per cent of gross domestic product (GDP), as against 3.6 per cent in the existing fiscal consolidation plan, set by Jaitley’s predecessor, P Chidambaram.
The Centre’s fiscal deficit would be affected by additional items such as increasing the share of the divisible pool of taxes to states and additional central sales tax compensation, a one-time item. Once this is out of the way, it will be explained, the fiscal calculations look much brighter and the government can reduce the deficit to three per cent of GDP by 2017-18, a ministry official said.
However, compensation to states for any loss from the coming goods and services tax is also to come and could affect the fiscal situation.
The previous government also tried hard to convince the rating agencies to upgrade India. However, S&P and Fitch had downgraded even their outlook to ‘negative’, to be later upgraded to ‘stable’.
The chances are that the rating agencies would at the most upgrade their outlook, before any raising of ratings.
Upgrade outlook
