Consolidation Key To Higher Rating: Dcr

Duff and Phelps Credit Rating (DCR) company has said that India could not achieve an investment-grade rating until

a credible and sustainable fiscal consolidation programme is put in place. DCR currently assigns foreign and local currency ratings of BB+ and BBB, respectively. The outlook on both ratings is stable.

In a statement released yesterday, DCR noted that India's combined central and state government fiscal of more than 8 per cent is among the highest of rated sovereigns. Persistently high fiscal deficits are likely to postpone the reduction of government debt -- which is 50 per cent of GDP and of its very high interest burden which accounts for nearly 50 per cent of government revenue receipts.

 

Fiscal consolidation in India requires an expansion of the tax base and defining expenditure priorities. "Efficiency and collection could also be improved for indirect taxes," said the statement.

In addition, the fiscal burden could be eased by an aggressive privatisation strategy which would not only improve microeconomic efficiency but also would transform state-owned enterprises into tax-paying entities.