MUMBAI: Standard & Poor's Ratings Services today said that it revised the outlook on the Republic of India to stable from negative. At the same time, the agency affirmed the 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India.
The revision in outlook reflects that India's fiscal position could now begin to recover and that its economy will remain on a strong growth path. The government budget targets a general government (including central and state governments) deficit of 8.3% in the fiscal year ending March 31, 2011, from 9.8% in the previous fiscal year.
The government intends to follow the medium-term fiscal consolidation plan outlined by the 13th Finance Commission. The Commission recommended that general government deficit be reduced to 5.4% of GDP and the ratio of general government debt to GDP be lowered to 68% of GDP by the fiscal year ending 2015. The government's decision, in February 2010, to change its fertilizer policy to implement a nutrient-based pricing policy and to raise urea prices by 10% from April 2010 is a step forward for the reduction of subsidies. The budget also announced an average increase in the prices of domestic petroleum and diesel of 6.0% and 7.8% respectively.
"We expect India's GDP growth to be 8.0% in fiscal year ending March 31, 2011, which is higher than many other countries' and exceeds our previous expectation," said Standard & Poor's credit analyst Takahira Ogawa. In addition, Standard & Poor's views India's external position as resilient. We expect the country's ratio of gross external financing need to current account receipts plus international reserves to remain stable at 77% in fiscal 2010.
