Fitch warns on Indian economy, need for reform

Fitch said several of the proposals announced by the government require legislative approval and policy reversals cannot be ruled out.

The government opened doors for foreign direct investment into sectors like multi-brand retail in mid-September but the parliament remains in deadlock, with no decisions reached since the start of the winter session on Nov. 22.

"The approach of general elections in 2014 means there is little time to fully enact reform. These risks are reflected in the Negative Outlook," Fitch added.

Fitch also pointed out that the government's five-year road map for reducing the fiscal deficit to 3 per cent of GDP by 2016-17 is a stronger statement of intent than seen in some time, but added that India's track record of delivering on fiscal policy goals has not been encouraging.

"A loosening in fiscal policy ahead of the elections could further weaken India's public finances and put pressure on the ratings," it said.

Policy, growth slippages could lead to India downgrade: Fitch

(PTI) Policy slippages and decline in growth trend could lead to downgrading of India's credit rating, global agency Fitch said today while projecting 6 per cent 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 per cent in FY13 (year to March 2013) from 6.5 per cent in FY12..." it said.

The agency had earlier pegged the GDP for the ongoing financial year at 6.5 per cent.

... contd.

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