Fiscal consolidation, low inflation environment must top govt agenda: Fitch

Clear mandate increases chances for decisive policy action

Rating agency Fitch today said BJP led National Democratic Alliance (NDA) which got strong mandate to form government at centre must take steps for fiscal consolidation, create low inflation climate and push for structural reforms.

These steps are necessary to create conducive atmosphere for pick up in investment and get back India’s economic growth on higher sustainable path, Fitch said in comments on election results for Lok Sabha.

The most salient issue for the new government from a sovereign credit perspective seems to get growth back to higher sustainable levels, which would require a strong pick up in investments, Fitch said.

For last two years economy has grown below five% per annum as it was hit by policy logjam, effect of global financial slowdown.
In a statement Fitch said a government with a clear mandate reduces uncertainty and increases the chances of decisive policy action to address the economic challenges India faces. It will watch whether the new government takes those chances.

The investment climate could be strengthened by a number of measures, including a clear strategy for fiscal consolidation, enhancing fiscal credibility. It should take step for creating low-inflation environment, and give push for structural reform including reforms related to governance, infrastructure bottlenecks and reduction of red tape, agency said.

It will take some time to get clarity on the new government's broad economic strategy. One key near-term data point will be the next government’s first Budget, expected in July, it added.