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Fitch retains India's rating at 'BBB-', outlook stable
08
Dec '15
America's Fitch Ratings has affirmed India's BBB- rating with a stable outlook, forecasting the country will grow 7.5 per cent in the current fiscal and 8 per cent next year.

"India's positive GDP growth outlook stands out globally," Fitch said in a statement. It said growth is supported by the government's reinforced capital expenditure and gradual implementation of a broad-based structural reform agenda.

The Indian economy grew 7.2 per cent in the first half of the current financial year and the 7.5 per cent growth forecast implies acceleration in the second half. According to Fitch's forecast, India will grow at 8 per cent in FY17, from 7.3 per cent in FY15.

Fitch welcomed the government's reforms drive. "The Reserve Bank of India's policy rate cuts of 125bp in total in 2015 are also likely to contribute to higher GDP growth, even though monetary transmission is impaired by relatively weak banking sector balance sheets," it said.
"The government continues to steadily roll out its ambitious structural reform agenda... that will likely improve the business environment, including changes in the FDI regime," Fitch said. The agency pointed out that the government has been unable shore up Parliamentary support for major reforms such as the Goods and Services Tax.

The agency also noted that those reforms that require only executive approval continue to be implemented and legislative reforms can still be pursued at the state level.

It said economic reforms are improving India's relatively weak business environment and standards of governance, but investors continue to face obstacles such as infrastructure bottlenecks.

Fitch noted that India is not immune to external shocks but seems less vulnerable than many other countries. The agency pointed to the sharp decline in the current account deficit to drive home its point. The agency expects the current account deficit to drop to 1.1 per cent of GDP in 2015-16, compared to the 'BBB' median of 5.6 per cent, and a build-up of reserves to 7.7 months of current external payments. (SH)

Fibre2Fashion News Desk – India

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