Standard & Poor's Ratings Services on Friday said finance minister P Chidambaram's Budget indicates the country's desire for fiscal prudence. | |
| "This Budget marks the new government's attempt at balancing demands from its coalition and presenting itself as fiscally responsible," S&P senior executives Ping Chew and Paul Coughlin said in Singapore. |
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| India's foreign currency rating by S&P is now BB/Stable/B and local currency BB+/Negative/B. It was widely expected that the global rating agency would upgrade India after the general elections. |
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| "A concerted effort between the different levels of government to control the fiscal deficit and stabilise the growth of the government's debt burden could result in a stable outlook for the local currency rating," S&P said. |
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| A better fiscal performance, along with structural reform to maintain the country's growth prospects and its strong external profile could lead to an improved foreign currency rating, it added. |
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| The Budget has targeted a fiscal deficit of 4.4 per cent of GDP, down from 4.6 per cent in 2003-2004. This is based on 7 per cent GDP growth and 18 per cent operating revenue growth, and the expectation of limiting total expenditure growth to 8 per cent. |
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| The government faces spending pressure partly due to its emphasis on public investment, infrastructure, and the rural and social sectors. |
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| "Achieving the target, however, will depend on revenue growth, which looks promising thanks to strong industrial growth contributing to tax intake, several tax measures and tighter tax administration," S&P said. |
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| Chidambaram announced plans to liberalise the agriculture sector, reservation policy for small-scale industry, and foreign investment environment in selected sectors, which could boost growth and investment prospects. |
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| Standard & Poor's sovereign ratings on India are constrained by the high public debt burden and fiscal inflexibility. |
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| The negative outlook on the local currency rating reflects the tentativeness in stemming the fiscal deterioration. |
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