India to take steps to improve its credit rating

The Government of India is all set to take a slew of measures to streamline and improve its growth rate figure consequent to Fitch and Standard & Poor''s downgrading the country''s credit rating.

Finance Minister Pranab Mukherjee said this in New Delhi on Tuesday.

 

Fitch Ratings cut its credit outlook for India to negative from stable, nearly two months after rival Standard & Poor''s made a similar call, citing risks that India''s growth outlook could deteriorate if policymaking and governance don''t improve.

 

The agency estimated general government debt for India of 66 percent of GDP at the end of the most recent fiscal year, compared with a median of 39 percent for BBB-rated countries.

 

India''s economy grew just 5.3 percent in the March quarter, the weakest in nine years.

 

However, on Monday, the country''s central bank, Reserve Bank of India unexpectedly left interest rates on hold, sending bonds, stocks and the rupee lower.

 

The rupee weakened further to 56 per dollar from around 55.82 before the Fitch statement. Bond yields were range-bound, while stocks were already shut for the day.

 

Fitch maintained its BBB- rating, the lowest investment grade.

 

"I have taken note of the comments, observations and ratings of Fitch. In certain areas we are yet to take appropriate measures. But we have already started taking appropriate measures. There have been some improvement in the inflow of FII (foreign institutional investment), FDI (foreign direct investment) and certain steps have been taken in the areas of external commercial borrowing, providing long term finance for infrastructure by creating the infrastructure debt fund. These have started yielding results but it will take some time," said Pranab Mukherjee.

 

Earlier, S&P had noted that India could become the first of the BRIC economies, which also include Brazil, Russia and China, to lose its investment-grade status, prompting an angry response from the government.

So much so, certain analysts had quipped to say that the Indonesia may replace India, the ''I ''in BRICS.