Fitch Ratings is not changing its medium term outlook on India's economy due to the rout suffered by the Bharatiya Janata Party (BJP)-led alliance in the assembly elections in Bihar. It does not believe that the reform process by the Centre would be reversed.
“While the opposition to some big ticket reforms, most prominently the land acquisition bill and the GST, has been substantial, the government has gradually rolled out a large number of initiatives and there is no indication it would now change course,” said Thomas Rookmaaker, Director in Fitch Ratings’ Asia-Pacific Sovereigns.
Fitch, like other rating agencies, had given lowest investment grade to India.
"The loss may complicate politics for the central government, but we don’t expect major implications on the economic front. The election results are not likely to impact decisions by foreign investors in other states," he said.
He said a big win for the BJP in Bihar would not have led to sufficient support in the Rajya Sabha anytime soon anyway.
"With continued opposition, the government will likely continue to try and pass legislation via ad hoc political deals, and if that does not work it may continue to resort to implementation of reforms at the state level," he said.
The Fitch Ratings official said the BJP’s defeat in the Bihar state assembly election does not change the agency's view on the medium-term economic outlook for India