Fiscal deficit hinders India rating upgrade

MUMBAI, FEB 22: India's high fiscal deficit was proving to be an obstacle in obtaining a sovereign rating upgrade, the head of Credit Rating Information Services of India (Crisil) said on Tuesday. "The external sector has been extremely positive, exports have done well this year, the foreign portfolio investments programme has been positive, the exchange rate is stable and the (foreign exchange) reserves are good," said R Ravimohan, Managing Director of Crisil.

Ravimohan said he expected the government to target a higher growth rate of 7 per cent in the next financial year to bridge the fiscal deficit. GDP growth in 1999/2000 is estimated between 6.0-6.5 per cent. Ravimohan said it was likely the government may introduce a service tax in the information technology and the farm services sector in its federal budget.

"There will be a need to tax... the Central Government has covered most of the services sector and at the moment these two segments are exempt," he said. Indian Finance Minister Yashwant Sinha is due to present the 2000/01 (April-March) federal budget in the lower house of Parliament on February 29.

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