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Money > Reuters > Report August 2, 2001 |
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Fiscal woes could push India's rating downIndia's rising fiscal deficit could pull down India's sovereign rating, a leading financial paper said on Thursday, quoting a Standard and Poor's official. S&P has a BB rating with a stable outlook assigned to India. "If the deficit of the central and the state governments continues to expand, that would put downward pressure on the rating," The Economic Times quoted Joydeep Mukherji, director, sovereign ratings at S&P as saying. Mukherji, who works out of New York, could not be immediately reached for comment. Three months into the current financial year, India's fiscal deficit was already more than a third of the full year target, which is pegged at 4.7 per cent of GDP for 2001-02. Analysts expect little scope for a reversal due to poor revenue collections caused by an economic slowdown. India exceeded its 2000-01 (April-March) fiscal deficit target of 5.1 per cent of GDP, finishing the year with a deficit of 5.2 per cent on the back of lower-than-targeted revenues. The combined fiscal deficit of the federal government and state governments has been pegged at close to 10 per cent in the past three years. The newspaper quoted Mukherji as saying that despite the economy growing at six per cent, the condition of India's public finances was weak. "Normally, an economy that grows at six per cent should be able to grow out of fiscal problems over the course of a few years, thanks to rising tax revenues," Mukherji said. "However, India's public finances are so weak that the government's problems have become worse even as GDP growth has hovered around six per cent for much of the last decade." On Wednesday, rival rating agency Moody's Investors Service said it was not reviewing India's rating or outlook. The rating agency currently has a speculative grade Ba2 rating with a positive outlook on India.
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