S&P cautions India against fiscal vulnerabilities

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S&P cautions India against fiscal vulnerabilities

by confuzzled dude Mon Apr 13, 2015 9:29 pm

Rating agency Standard & Poor’s (S&P) on Monday said structural fiscal weakness can be a drag on India’s sovereign credit profile. Like the other two rating agencies — Moody’s Investors Service and Fitch Ratings — S&P, too, has India at the lowest investment grade.

However, unlike Moody’s action to upgrade outlook on India’s rating last week, S&P did not take any action on outlook, which remained at ‘stable’.

Moody’s had also said it affirmed the lowest investment rating for India, keeping in mind India’s weaker performance on the fiscal and other fronts. However, it had also added that the government’s policies were beginning to address these factors, but the extent of likely improvements was still unclear. The rating agency had also said it would watch developments in 12-18 months to see whether the rating itself could be upgraded or not.

According to S&P, the Centre’s efforts to go for fiscal consolidation justifies India’s lowest investment rating, cautioning that its credit profile could face a downside risk from structural fiscal weakness. Fitch, on the other hand, had retained outlook on India’s lowest investment rating to ‘stable’ last week.

“However, the latest-year deficit reduction didn’t come easy. Disappointing tax collections, especially services tax collection, dragged estimated total revenue for the fiscal year ended March 2015 by 6.3 per cent below the central government’s initial Budget projection,” it added.

The government had to cut spending by a similar proportion to prevent the Budget shortfall from widening. Since the subsidy Bill came in above expectations, the government made significant cuts to capital investments to bring spending down.

The rating agency said without further fiscal reforms, the Union government might find it difficult to sustain the increase in public investment spending

http://www.business-standard.com/article/economy-policy/s-p-cautions-india-against-fiscal-vulnerabilities-to-credit-profile-115041300704_1.html

Reality finally sinking in. Let's hope that Modiji completes his world tour soon and gets back to work.

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Join date : 2011-05-08