India on Thursday made a strong pitch for an upgrade of its sovereign credit ratings in its consultations with the US-credit rating agency Standard and Poor’s (S&P) amid signs of a turnaround in the economy that has slumped to a decade-low growth in 2012-13.
“I think there is a case for an upgrade because we have taken the kind of decisions that most of countries in the world have not been able to take. This country has shown its determination to put the economy back on track. We believe it will happen and there is no doubt about it,” Arvind Mayaram, economic affairs secretary, told reporters after a meeting with representatives of S&P.
India’s gross domestic product (GDP) is set to grow at 6.4% in 2013-14, according to the Prime Minister’s Economic Advisory Council’s (PMEAC’s) projection on Tuesday, signalling a swift turnaround in Asia’s third largest economy from decade-low of 5% in the last fiscal.
Mayaram said the government has taken bold and tough decisions such as reducing subsidies on petroleum products and attempts to rein in the fiscal deficit. “We have spoken to them convincingly. We have shown that the reforms are on track,” he said.
Finance minister P Chidambaram in the budget for 2013-14 unveiled plans to reduce India’s fiscal deficit to 3% of GDP in five years demonstrating the government’s intent to walk the talk on fiscal discipline.
The government is of the view that the CAD, which touched a record 6.7% of GDP in the October-December quarter, for the full financial year would be more tolerable.
Last year, the three US credit rating agencies — S&P, Moody’s and Fitch — were unsparing in their criticism over India’s macro-economic fundamentals and precarious public finances.
In October, S&P had warned that India still faces a “one in three” chance of a downgrade despite the recent spate of moves to open up insurance, pension and multi-brand retail sectors to foreign investment.
A downgrade would mean the government would have to pay higher interest rates on its public borrowing, which can potentially erode India’s attractiveness as a global business hotspot.