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

India-China Ties

REUTERS SHOWCASE

India-US Diplomacy

India-US Diplomacy

Obama to nominate Indian-American Richard Verma as India ambassador - congressional source.  Full Article 

GMR in Nepal

GMR in Nepal

Nepal clears India’s GMR plan for $1.4 bln hydroelectric plant.  Full Article 

LIC on Markets

LIC on Markets

LIC chairman bullish on Indian markets  Full Article 

India Rains

India Rains

Monsoon rains weaken as late retreat looms.  Full Article 

Infosys-Huawei

Infosys-Huawei

Infosys partners with China's Huawei for cloud-based services  Full Article 

Gold Outlook

Gold Outlook

Gold imports seen up, premiums likely to double on festive buying  Full Article 

Trade Dispute

Trade Dispute

U.S. to press India on trade row during Modi's Washington visit  Full Article 

Reuters India Mobile

Reuters India Mobile

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