Stability of govt vital 8212; DCR

DCR currently rates India8217;s foreign and local currency obligations BB8217; and BBB8217; respectively. DCR8217;s South Asia analyst Shelly Shetty said a strong government would be able to tackle the problem of high fiscal deficit effectively, which had been the overriding concern for some time.

He said a weak government would be more engaged in political manoeuverings to keep the coalition intact. In that case, economic reforms would suffer badly. As per the trends available, it was unlikely that a single party would have a clear majority. In such a scenario, the new government would be stable and cohesive if it consisted of relatively small number of parties, the agency noted.

India8217;s ratings and stable outlook reflected the country8217;s relatively strong forex reserve position and favourable external debt structure, the statement said.

Expressing doubt at the government8217;s ability to achieve a fiscal deficit target of 4.4 per cent of GDP by 1999-2000, DCR said, this was so largely due to the additional defence expenditure arising out of the Kargil conflict.

Also, flexilibility in India8217;s public finances was extremely limited due to high government debt burden, it said. Advocating greater restructuring of the economy, DCR said, the recent rebound was largely driven by higher rural income resulting from good agricultural performances. In addition, a recovery on the export front and an accommodative fiscal and monetary policies would add momentum to the growth process, it said.

On the issues pending before the new government, DCR charted out that the priority areas were fiscal deficit reduction, privatisation, liberalisation of the trade and financial sectors and development of infrastructure.