DCR said that a strong government, able to accelerate economic reforms, would support India's sovereign ratings. On the other hand, failure to implement the reforms could be negative for the country's ratings.

DCR currently rates India's foreign and local currency obligations `BB+' and `BBB' respectively. DCR's South Asia analyst Shelly Shetty said a strong government would be able to tackle the problem of high fiscal deficit effectively, which had been the overriding concern for some time.

He said a weak government would be more engaged in political manoeuverings to keep the coalition intact. In that case, economic reforms would suffer badly. As per the trends available, it was unlikely that a single party would have a clear majority. In such a scenario, the new government would be stable and cohesive if itconsisted of relatively small number of parties, the agency noted.

India's ratings and stable outlook reflected the country's relatively strong forex reserve position and favourable external debt structure, the statement said.

Expressing doubt at the government's ability to achieve a fiscal deficit target of 4.4 per cent of GDP by 1999-2000, DCR said, this was so largely due to the additional defence expenditure arising out of the Kargil conflict.

Also, flexilibility in India's public finances was extremely limited due to high government debt burden, it said. Advocating greater restructuring of the economy, DCR said, the recent rebound was largely driven by higher rural income resulting from good agricultural performances. In addition, a recovery on the export front and an accommodative fiscal and monetary policies would add momentum to the growth process, it said.