Concerns expressed by S&P will be resolved this year: PMEAC

Some concerns expressed by S&P will also be resolved during the year.

Written by ENS Economic Bureau | New Delhi | Published: April 28, 2012 1:02 am

Projecting a GDP growth of close to 7.5 per cent in the current fiscal,PM’s Economic Advisory Council chairman C Rangarajan expressed confidence on Friday that Standard & Poor’s would revise and may even upgrade India’s long-term credit outlook.

“Some concerns expressed by S&P will also be resolved during the year. I would expect S&P to reverse and perhaps upgrade rather than downgrade,” Rangarajan said on the sidelines of an AMCHAM event,but stressed on the need to improve governance.

“We need to improve governance. Only then will we achieve the fruits of what we are trying to do,” he said.

S&P had earlier this week downgraded India’s rating outlook to negative and warned of a downgrade in two years if there is no improvement in the fiscal situation and if the political climate worsen. The lowering of outlook from stable (BBB+) to negative (BBB-) is expected to make external commercial borrowings expensive for Indian Inc. Another rating agency — Moody’s Analytics had said that politics was weighing down the economy.

But Rangarajan said that the economy would perform better than the 6.9 per cent growth it clocked in 2011-12 and the deficit would be contianed at the Budgeted 5.1 per cent of the GDP.

“I expect the growth rate in current fiscal to improve. I expect growth rate in 2012-13 to be between 7 and 7.5 per cent,” he said,adding that the economy has the potential to grow at 9 per cent as the savings and investment rates improve.

He further said inflation continues to remain high and that monetary and fiscal policies should aim at reducing it to 5-6 per cent. He said average inflation for 2012-13 would be around 6.5 per cent.

“The inflation rate for the current fiscal will be significantly lower than what we had seen last year and this could lead to an easing of the monetary policy during the course of the year,” he said.

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