Samp;P moots public-sector reforms

NEW YORK, NOV 13: Public-sector reforms hold the key to India's credit rating, according to the global credit rating agency Standard amp...

NEW YORK, NOV 13: Public-sector reforms hold the key to India8217;s credit rating, according to the global credit rating agency Standard amp; Poor Samp;P. In a special report on India, published in its Creditweek magazine and circulated to global investors, the global rating agency said, quot;Prospects for an improvement in India8217;s economic performance and credit standing depend on whether stability can lead to a new political consensus in favour of more significant structural reforms in the public sector.quot;

The report was written by Joydeep Mukherjee, Standard amp; Poor8217;s analyst specialising in India. Acknowledging the growing economic prosperity, the report said Samp;P lowered the nation8217;s long-term foreign currency credit rating to quot;BBquot; from quot;BBquot; because of the quot;government8217;s eroding financial strength.quot;

Even though the report complimented the nation8217;s quot;insularity of economic policies from political turmoil,quot; which was reflected by the passing of two fiscal budgets after the fall of a government, it made a scathingcomment on the government8217;s failure to address the public sector finances. quot;India8217;s strong political consensus in favour of weak reformsquot; is limiting the country8217;s economic prospects,quot; said Mukherjee.

The underlying political maturity behind the turbulence of partisanship permits a stronger commitment to economic reforms provided that India8217;s leadership pursues them, he said. Total public-sector borrowing, most of which is spent on salaries and interest charges, consumes around 40 per cent of the country8217;s domestic savings, seriously limiting growth prospects of the country, the report said. On the fiscal trends the report noted that quot;the poor progress in reforming India8217;s complicated and inefficient structure of indirect and excise taxes as well as the weak coverage of the growing service sector.quot;