FinMin to pitch for ratings upgrade with Fitch, other agencies

The government also implemented partial decontrol of diesel and capped subsidised LPG cylinders

Armed with the Budget proposals to bring down the fiscal deficit, the finance ministry would pitch for a ratings upgrade at a series of meetings with global agencies over the next few weeks, beginning with Fitch tomorrow.

“The Fitch team will come tomorrow. Representatives from Standard & Poor’s and Moody’s are scheduled to visit on April 25 and May 5 (respectively),” a senior ministry official said.

The officials, sources said, would impress upon rating agencies the resolve of the government to follow a path of financial prudence and bring down the fiscal deficit to three per cent of GDP by 2016-17.

Finance Minister P Chidambaram in the 2013-14 Budget had proposed to bring down the fiscal deficit to 4.8 per cent from 5.2 per cent in 2012-13.

To promote growth and investment, the government had announced various measures like allowing FDI in multi-brand retailing and raising foreign investment caps in other sectors. The government also implemented partial decontrol of diesel pricing and capped subsidised LPG cylinders, with a bid to check the rising subsidy bill.

The Fitch representatives would meet Economic Affairs Secretary Arvind Mayaram and officials from various departments, including capital markets, infrastructure, revenue and disinvestment, the official said.

Both S&P and Fitch had earlier threatened to downgrade India’s credit rating as an aftermath of the expansionary policy which led to a rising fiscal deficit. The fiscal deficit had touched a high of 5.8 per cent in 2011-12.

After the presentation of Union Budget, S&P and Fitch had said India’s sovereign rating was unaffected but had warned that policy execution and controlling subsidies would be the key risks to look out for during the year.

S&P currently rates India as ‘BBB-’, lowest in the investment grade, with a negative outlook. Any further downgrade would push India’s rating to the junk status, making it difficult and costlier for Indian entities to borrow funds overseas.

After lowering India’s credit outlook to negative, Fitch had in August said the possibility of downgrading the country’s sovereign rating was more than 50 per cent in the next 12-24 months unless reforms are carried out.

The negative outlook suggests there was a more than likely chance of Fitch revising rating downward from ‘BBB-’ to ‘BB+’.