Fitch retains India's rating; revision depends on bold reforms

Global agency Fitch Ratings today said it has retained the 'BBB-' sovereign rating - the lowest investment grade - on India and a revision will depend on the government's efforts to usher in bold reforms.

The agency has also retained 'stable' outlook for the country's ratings.

Fitch said the Budget 2014-15 announced by the new government is positive of credit-ratings and further revision will be dependent on the government's willingness to make difficult choices.

"India may have cleared the ground for progress on credit -supportive reforms, but the government's willingness to make difficult choices remains to be tested," Fitch said in a conference call from Hong Kong.

Apart from Fitch, Moody's also holds a stable outlook on the country's sovereign ratings. The present 'BBB-' rating is the lowest investment grade rating.

Last year all the rating agencies had threatened a downgrade citing worsening macroeconomic conditions led by a free-falling rupee and a ballooning current account deficit.

The agency had affirmed 'BBB-' rating for the country in April this year, reflecting the balance between high foreign- exchange reserves and real GDP growth compared with its peers, and weak fiscal balances and low governance standards.

Fitch further said it expects the real GDP growth at 5.5% in the current fiscal and 6.5% in FY16.

The government has kept the fiscal deficit target at 4.1% of GDP for the current fiscal and sees it narrowing to 3% by FY17.

"The fiscal deficit target would be constructive if achieved, while further revenue-strengthening or expenditure- saving measures seem needed to reach these targets," the rating agency said.

Fitch said it needs to be seen how the goods and services tax (GST) roll-out will impact the revenues and in case of any shortfall how the government will manage to improve its revenues.

It said the current account deficit was a concern for investors in the 2013, but has narrowed due to policy rate hikes and measures such as those to curb the import of gold.