Mumbai: There has been some deterioration in India’s fiscal deficit but not enough to warrant a downgrade in its ratings now, Fitch Ratings said on Friday, adding some populist spending was to be expected in an election year.
A slew of measures such as a $17 billion farm loan waiver, tax cuts, subsidies for state-owned fertilizer and oil companies and duty cuts to help reduce inflation pressures are expected to see the government miss its target of a deficit of 2.5% of GDP in the fiscal year 2008-09.
The fiscal deficit in FY 2007-08 was 2.8% of GDP.
“We are reasonably comfortable accepting the fiscal deterioration in India given where the current rating level is,” McCormack said. Fitch currently rates India at “BBB-”, its lowest investment grade rating. McCormack said there would be an annual review of the ratings in the third quarter of 2008.
“We are not critical of the policy path,” McCormack said.
“There is some populist spending, but that was expected given that we are entering an election year.”