Policy slippages and decline ingrowth trend could lead to downgrading of India's credit rating, global agency Fitch said on Monday while projecting 6% growth in the current fiscal.
"Policy slippage and/or mounting evidence of a structural decline in the trend growth rate, such as
protracted relatively weak economic data, could cause the ratings to be downgraded," Fitch said in a statement.
It said however that an improved investment climate that supports greater infrastructure investment, and a sharp sustained decline in inflation, would support the current 'BBB -' rating.
Referring to India's economic growth, Fitch said, "We expect the economic recovery to be shallow. We forecast real GDP growth to fall to 6% in FY13 (year to March 2013) from 6.5% in FY12..." it said.
The agency had earlier pegged the GDP for the ongoing financial year at 6.5%.
India's GDP growth slumped to 5.3% in second quarter of the fiscal from 6.7% year-on-year.
Fitch, which lowered India's credit rating outlook to negative from stable in June, had in the following month said that possibility of downgrading the country's sovereign rating is more than 50% in the next 12-24 months.
The statement comes days after Moody's said that rating outlook of India is stable due to its strong economic growth along with high saving and investment rates.
Fitch further said that recent reform proposals, while potentially growth-supportive, need time to work and face political risks to their implementation.
"But political and implementation risk remains considerable. Several proposals still require legislative approval, and policy reversals cannot be ruled out.
"The approach of general elections in 2014 mean there is little time to fully enact reform. These risks are reflected in the Negative Outlook," it said.