New Delhi: The finance ministry on Thursday said that India’s credit-worthiness is unlikely to be downgraded due to the country’s high fiscal deficit.
“I don’t expect any downgrade in rating ... If the demands are not met then there would be problem,” a senior finance ministry official told the agency on the sidelines of a CII seminar.
The ministry will be meeting all the agencies that rate India, including Moody’s, in the second week of August to discuss the fiscal situation.
“Normally we meet after the Budget, this time we will meet in the second week of August to discuss the fiscal situation,” he said.
On Wednesday the finance minister expressed concern about the high fiscal deficit of about 6.8% this year. He said some international rating agencies — S&P, Moody’s and others — can think of downgrading India.
“(Given) this high level of fiscal deficit, some international rating agencies — S&P, Moody’s and others — can think of downgrading the rating, but the question is what would be the first priority of an Indian finance minister — to take care of the Indian poor or satisfy the requirements of a rating agency?” finance minister Pranab Mukherjee had said in the Rajya Sabha.
Earlier, global rating agency Standard and Poor’s had downgraded the outlook on India’s ratings after the interim Budget, which had pegged the fiscal deficit at 5.5% of GDP for the current fiscal.
At present, S&P assigns the lowest investment grade — BBB negative ratings — to India.
Another global rating agency Moody’s had also expressed concern at India’s high fiscal deficit projected at 6.8% for this fiscal and cautioned that the situation may be complicated in the absence of measures like a clear roadmap for disinvestment and structural reforms.
Moody’s had said that cyclical deterioration in the country’s public finances could leave the authorities ill-equipped to tackle external shocks which may happen in future.