Japan Credit Rating Agency (JCR) today said even though India has positives such as high growth rate and forex reserves, factors like higher fiscal deficit and weakness in exports constrain its sovereign rating.
"On exports, India is not doing as much as it can. The biggest constraint is ease of doing business, infrastructure, financial intermediation, land and labour, and supply side factors," JCR's Special Representative for Asia, Satoshi Nakagawa, told reporters here.
Even though Finance Minister Arun Jaitley has promised to adhere to the fiscal consolidation targets, the overall deficit figure, including that of states and public debt, is high, he said.
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JCR has a BBB+ rating on the country. The agency upgraded the outlook on it to stable in February, when the last review was done.
Nakagawa said his company has a two-member dedicated analyst team tracking the developments in India and the agency's annual review of the rating is due anytime now.
Nakagawa said the country's exports are not up to the mark and identified difficulties in ease of doing business as one of the biggest impediments.
The government has already identified this as a focus area and the country has moved up on the World Bank's ease of doing business ranking.
On the positives, he said a high GDP growth of over 7 per cent, successes in reducing macroeconomic imbalances and high forex reserves, which can help fight any issue on the balance of payments side, are important influencing factors.
He said the JCR's rating is two notches above that of the global agencies, which reflects its confidence in Asia's third largest economy.
JCR today also announced a strategic tie-up with domestic credit rating agency Care Ratings in backdrop of the growing Indo-Japanese trade and finance ties.
Asked if JCR would like to take an equity stake in Care Ratings in the future, Nakagawa said, "Anything is possible. The first thing we are doing is trying to start a close relationship with Care Ratings. We are seeing how we can go further."
At present, each of Care Ratings' rivals in the domestic ratings space, including Icra, India Ratings and Crisil, are backed by global rating majors Moody's, Fitch and Standard & Poor's, respectively.