With an improved economic outlook, India has pitched for an upgrade in its sovereign rating by global rating agency Fitch pointing to its slew of reform measures, lower crude oil prices and fiscal consolidation plan.
“We have a case for rating upgrade. Inflation has come down, growth has picked up, a number of reform measures have been announced and we are well on the path of fiscal consolidation,” the finance ministry’s chief economic adviser Arvind Subramanian told reporters.
Subramanian along with a team of finance ministry officials met executives from global rating agency Fitch on Thursday and explained the impact of the announcements in the Union Budget 2015-16 on the Indian economy.
At present, India is rated at the lowest investment grade with a “stable” outlook by Fitch as well as other major global rating agencies including Standard and Poor’s and Moody’s Investors Service.
However, after the Union Budget on February 28, Fitch had praised the government’s efforts on structural reforms but had warned that the medium-term fiscal consolidation strategy is “less aspiring” than in the past, which is a negative from a sovereign rating perspective.
But defending the Centre’s stance on fiscal deficit that is now targeted at 3.9 per cent of the GDP in 2015-16, Subramanian said, “Our view is that (the target of) 3.6 per cent (for 2015-16) was done at a time when macro instability and inflation was high. Today, it has changed. we are still consolidating. We are still going down. The question is whether we should accelerate.”
Officials also explained the recommendations of the Fourteenth Finance Commission to the Fitch team and its impact on India’s deficit while highlighting the government’s commitments to meet the targets for fiscal and current account deficits.