News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

This article was first published 11 years ago
Home  » Business » Fitch renews warning on India's outlook

Fitch renews warning on India's outlook

By Lisa Twaronite
January 08, 2013 14:41 IST
Get Rediff News in your Inbox:

Fitch Ratings reiterated on Tuesday its "negative" outlook on India's sovereign credit rating, citing concerns about slowing economic growth, persistent inflationary pressures and an uncertain fiscal outlook.

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 percent from a year earlier, below the 5.5 per cent 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 per cent 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 at BBB-, the lowest investment grade rating. Moody's has a "stable" outlook on its comparable Baa3 rating for India.

The government has since unveiled measures such as raising fuel prices and further opening up the retail sectors for foreign investment. The government is also aiming to keep its fiscal deficit at 5.3 per cent for the year ending in March.

"The fact that rating agencies are not getting overly enthused by reform measures shows that they will wait for actual improvement in macro data to change their stance," said Samiran Chakrabarty, head of research at Standard Chartered Bank in Mumbai.

Get Rediff News in your Inbox:
Lisa Twaronite in Tokyo
Source: REUTERS
© Copyright 2024 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
 

Moneywiz Live!