India ratings face pressure on widening deficit: Moody’s

India ratings face pressure on widening deficit: Moody’s
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First Published: Thu, May 28 2009. 11 34 AM IST
Updated: Thu, May 28 2009. 11 34 AM IST
Mumbai: The outlook for India’s foreign and local currency ratings is stable but it faces challenges in areas of macroeconomic management and a backlog of structural reforms, Moody’s Investors Service said on Thursday.
India has a foreign currency rating of ‘Baa3’ and local currency rating ‘Ba2´.
“India’s ratings are based on Moody’s assessment of the country’s moderate levels of economic and institutional strength that in turn are supported by a large, rapidly growing, and well-diversified economic structure,” says Aninda Mitra, a Moody’s vice-president and senior analyst.
While the nation’s track record of overall macro-policy effectiveness is modest, predictability and credibility of its fiscal policy has deteriorated recently, he added.
India’s poor fiscal fundamentals are a result of deeply entrenched framework of subsidies and the government’s relatively weak expenditure restraint, although external shocks have also played a role, Mitra said, adding that the government’s low financial strength is also due to its poor debt affordability.
Finance minister Pranab Mukherjee said on Wednesday the government was ready to deliver further fiscal stimulus, but hoped to maintain a fiscal deficit target of 5.5% in 2009-10.
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First Published: Thu, May 28 2009. 11 34 AM IST