SCR Vulnerable To Further Setbacks...
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Expressing concern at the rapid deterioration of the fiscal situation in the country, gobal rating agency Moody's has said India's sovereign credit rating is vulnerable to further setbacks.
"The vast chasm between the stated intent of the Fiscal Responsibility and Budget Management (FRBM) Act and the actual fiscal outcomes leaves India's investment cycle, its growth prospects, and the sovereign credit rating vulnerable to further setbacks," Moody's Senior Analyst Aninda Mitra told PTI.
The rating agency, he had said earlier in February, would review the ratings after the Lok Sabha elections, taking into account the fiscal policy stance of the new government.
India's fiscal deficit continues to remain a sensitive area as far as risk perceptions about India's creditworthiness are concerned, Mitra said, adding that India's economic recovery is still "very incipient".
Viewed broadly, he said the recovery "could be a statistical bounceback and the overall economy remains subject to further credit risks and policy transmission risks." As regards raising public expenditure to boost demand, Moody's said it was more of a populist measures than initiatives to counter the impact of economic slowdown.
Dismissing the government's claim that it consciously raised expenditure in anticipation of a slowdown, Moody's said, "We believe that it was mostly populism and not counter-cyclical foresight." Moreover, the agency added it was doubtful that expenditure would be quickly curbed after a pick-up in demand for industrial goods.
Meanwhile, another credit rating agency Standard and Poor's has said its sovereign rating outlook for India would largely depend upon the economic and fiscal policies of the new government and also the pace of recovery of the global economy.
"We don't still know how much and at which pace the global and Indian economies are getting better," S&P Sovereign Analyst Takahira Ogawa said.
On whether fiscal deficit was still a matter of big concern for India, he said, "The single largest negative factor on the sovereign ratings on India has been the fiscal deficit and it would still remain so in the foreseeable future." S&P on 24 February downgraded the credit rating outlook for India from stable to negative citing reasons such as worsening public finances, rising overseas borrowings and the weakening Indian currency.