Playing down the warning of a sovereign rating downgrade,new RBI Governor Raghuram Rajan today said the recent statement from the global rating agency Standard and Poor’s nearly reiterated its long standing claims.
S&P had said yesterday that there is one third possibility of a rating downgrade of India.
“As far as I understand,S&P nearly reiterated what has been its long standing claim about there is one third possibility of a rating downgrade and one third of the long period is something like a year year or so,” he said in his maiden press briefing.
The threat had spooked the markets yesterday with Sensex nosediving over 651 points and rupee ending 163 paise down at 67.63 against dollar. However,the stock market as well as the rupee made gains today.
“Given the kind of rating they have given us,the associated probability is also relatively fixed. So I won’t read too much into that statement,” he added.
He cautioned,however,that the country has to be careful about the government finances amidst rising rupee leading to increase in subsidy on account of fuel and fertiliser.
“Obviously,you know given higher oil prices and so on,we have to be somewhat careful about government finances,” he said.
Last year,S&P had said India faces one-in-three chance of rating downgrade in the next two years in case the government fails to push reforms in view of the political gridlock and ensuing general election in 2014.
The problems being faced by the economy include soaring fiscal deficit and high inflation,S&P had said while retaining India’s rating at ‘BBB-‘,lowest in the investment grade. PTI KPM DP AA ANZ SA 09042052