The finance ministry on Thursday made a strong pitch about India’s robust macro fundamentals as the US credit rating agency began consultations ahead of sovereign ratings revision with fresh question marks looming over the economy hit by a sliding rupee, galloping prices and delicate government finances.
“We pitched for a rating upgrade,” a finance ministry official said after a meeting with Fitch representatives here. “We told them look at the FDI inflows, look at the returns in the market. We said we are committed to capping subsidy at 2 % of GDP.’
At Rs 5,13,590 crore, or 5.1% of GDP (gross domestic product), India’s high fiscal deficit and a heavy government debt burden remain India’s key worries. Another round of meetings are scheduled for Friday between finance ministry officials and Fitch, which had last rated India’s foreign and local currency rating at BBB-/stable.
Last month, Standard and Poor’s (S&P) downgraded India's credit outlook to negative in a sign that the Indian government maybe on a dangerous course towards borrowing beyond its capacity to repay.
S&P had maintained India’s rating at BBB-, which is just a notch above “junk” that carries a higher risk of default by the government.
It also warned that that it may downgrade India's rating in the next two years if the financial situation worsens.
Fitch, which has downgraded most major economies of the world since last year, is expected to come out with its revised India ratings within a month.
India's economic growth is estimated to slowdown to 6.9% in 2011-12, the final data for which will released later this month, the slowest in three years.
A slew of proposals including the government's decision to retrospectively tax older corporate transactions such as the Vodafone-Hutch deal of 2007, has sparked fears among global and domestic investors, who say this would choke foreign investment into India.
India continues to remain a global investors' preferred hotspot as seen in high foreign direct investment (FDI) and foreign institutional investment (FII) inflows, said the finance ministry official. Finance minister Pranab Mukherjee had said on Wednesday that a set of austerity measures were on the anvil.