Photo: Bloomberg
Photo: Bloomberg

India needs to improve fiscal deficit for ratings upgrade: S&P

Interest payments and subsidies account for almost 40% of total budgetary expenditure, says Standard & Poor's

Mumbai: India needs to lower its debt to GDP (gross domestic product) ratio and materially lower its fiscal deficit for a ratings upgrade, Kyran Curry, S&P director, sovereign ratings in Asia, told Reuters after the federal budget was announced earlier on Monday.

The country’s debt to GDP ratio falling to below 60% would bring a “clear upside" to the sovereign ratings, Curry said. It currently stands at 67%.

“We will really be looking for material gains in the government stabilising its fiscal position. So that basically means a lower fiscal deficit and material falls in its debt stock and we are not seeing that in this budget," Curry told Reuters over phone from Singapore.

“We are just seeing continuing a very, very slow pace in its (government’s) consolidation path. And that if anything, delays a ratings rise," Curry added. “The government’s debt burden and subsidy spending continue to significantly constrain its fiscal policy options. Interest payments and subsidies account for almost 40% of total budgetary expenditure."

S&P retained its sovereign rating on India at BBB-minus with a “stable" outlook saying a ratings upgrade was unlikely until next year, in a statement issued earlier on Monday.

However, the next ratings move for India’s sovereign credit profile would be upward, Curry said.

Despite hefty commitments on rural welfare and health, finance minister Arun Jaitley managed to stick to his fiscal deficit target of 3.5% of GPD for fiscal 2017. Reuters