Fitch renews warning on India's outlook

TOKYO/MUMBAI Tue Jan 8, 2013 4:05pm IST

1 of 2. Construction workers work at a site as the sun sets in Chandigarh December 16, 2006.

Credit: Reuters/Ajay Verma/Files

Related Topics

TOKYO/MUMBAI (Reuters) - 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 percent 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 percent 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 percent 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.

(Reporting by Lisa Twaronite in TOKYO and Rafael Nam in MUMBAI; Editing by Kim Coghill)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Culling Plans

REUTERS SHOWCASE

Drug Approval

Drug Approval

Epirus, Ranbaxy win India approval for arthritis drug copy.  Full Article 

Fresh Demand

Fresh Demand

As mining curbs bite, India offers market to glut-hit iron ore.  Full Article 

Root Out 'Bad Apples'

Root Out 'Bad Apples'

RBI chief calls for cleaning up of banking system.  Full Article 

Android One

Android One

Google launches $105 Android One; eyes low-price smartphone boom.  Full Article 

Cognizant Deal

Cognizant Deal

Cognizant to buy TriZetto for $2.7 billion to boost healthcare business  Full Article 

India-Vietnam Ties

India-Vietnam Ties

India tightens Vietnam defence, oil ties ahead of China Xi's visit.  Full Article 

Antitrust Crusade

Antitrust Crusade

INSIGHT - "Mr. Confession" and his boss drive China's antitrust crusade .  Full Article 

Inflation Eases

Inflation Eases

Aug WPI inflation eases to near five-year low of 3.74 percent  Full Article 

Kashmir Floods

Kashmir Floods

Disease threatens as Kashmir flood waters turn fetid  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage