Next govt with less majority may find challenging to take on reforms: Fitch

Maintaining the country's sovereign rating at the lowest investment grade, Fitch Ratings on Thursday said the next government with likely reduced majority may find it more difficult to gather support for reforms. Fitch projected the economic growth to be 6.8 per cent in 2019-20, lower than RBI's projection of 7.2 per cent. 

"Polls indicate that the next government will likely have a smaller majority in the lower house of parliament, the Lok Sabha, than the current government and it might find it more difficult to garner support for major reforms such as the GST," Fitch said. 

However, there seems plenty of potential for a continued focus on reforms, for instance through enhancement of the efficiency and effectiveness of the administration and the legal and judiciary system, it added.

It said while governments of different political persuasions have been generally reform-minded and the current one has implemented some ambitious and transformative reforms, but difficulties in doing business in India continue to linger, coinciding with lacklustre FDI inflows. 

"Gross FDI inflows into India of 1.4% of GDP in the year through third quarter of 2018 were below the 1.7% of GDP four years earlier," it said. 

It said a weak fiscal position continues to constrain the country's sovereign ratings. In this regard, the next government's medium-term fiscal policy will be of particular importance from a rating perspective, it said.