INSUBCONTINENT EXCLUSIVE:
year in a row, Fitch Thursday retained its sovereign rating for the country at 'BBB-', the lowest investment grade with a stable outlook,
saying a weak fiscal position continues to constrain the ratings and there were significant risks to macroeconomic outlook
The government has been making a strong pitch to Fitch Ratings for an upgrade after rival Moody's Investors Service in November 2017 gave
the country its first sovereign rating upgrade since 2004
Fitch had last upgraded India's sovereign rating from BB+ to BBB- with a stable outlook on August 1, 2006."Fitch Ratings has affirmed
said, "balances a strong medium-term growth outlook and favourable external balances relative to peers with weak fiscal finances, a fragile
growth, resulting from further problems in the banking or shadow-banking sector," it said
to meet deficit target of 3.3 per cent of GDP in the current financial year (2018-19) due to lower revenues including from GST in first
half, and expenditures being difficult to control in the run-up to general elections were main reasons for the weak fiscal position, it
versus the 'BBB' median of 59th percentile)
India's ranking on the United Nations Human Development Index (31st percentile versus the 'BBB' median of 68th percentile) also indicates
investment and growth rates without the creation of macro imbalances could trigger a "positive rating action", a rise in debt burden of the
sovereign and loose macroeconomic policy settings that cause a return of persistently high inflation and widening current-account deficits
negative in 2012 and then again to stable in the following year, though it kept the rating unchanged at the lowest investment grade
The Fitch review for annual sovereign rating follows India's rating upgrade by Moody's after a gap of 14 years, while SP retained its rating
for the country.While Moody's had in November 2017 raised India's sovereign rating from the lowest investment grade of 'Baa3' to 'Baa2', SP
refrained from upgrading the rating from 'BBB-' citing high government debt and low-income levels.SP has maintained 'BBB-' rating on India
Fitch in its rating action Thursday listed recent defaults by Infrastructure Leasing Financial Services and some public-sector banks to
significantly spur credit growth, as they still have weak core capital positions," it said adding non-performing loan (NPL) ratio could in
to the general elections to be held by May 2019, and relaxation of lending regulations to some troubled sectors could delay the clean-up of
the banking sector," it said.Stating that its strong growth outlook continues to stand out among peers, Fitch put the real GDP growth in the
however, subject to downside risks from tightening financial conditions, weak financial-sector balance sheets and high international oil
current year growth forecast of Fitch is an upgrade over 7.3 per cent it had predicted in April this year but for the prediction for the
190 countries on the World Bank's Ease of Doing Business ranking was "remarkable", lingering difficulties in doing business in India remain,
including in starting a business and enforcing contracts, and FDI is lagging, it said
"The reform effort also has yet to translate into a significant strengthening of total factor productivity growth, as steep labour
productivity growth in the past decade was instead underpinned by a swift rise in capital deepening."
