Fiscal Reforms to Determine India’s Ratings

Assessment of India’s credit ratings will be determined mainly by the extent of its fiscal reforms, not recent revisions to its economic growth data.

The comments come a day after rival Standard & Poor’s said India must boost growth, cut its fiscal deficit and fulfill promises of financial and fiscal reforms in order to justify an upgrade in its credit rating.

The government on Saturday will present its fiscal budget for the new fiscal year starting in April amid high hopes that it will find a way to boost capital spending while exercising fiscal restraint.

“The upward revisions of India’s GDP growth based on methodological and base year updates – highlight the strength of the economy, but do not impact overall assessment of the sovereign’s credit profile,”.

“Rather, fiscal and structural reform policies will determine the extent to which accelerating growth will buttress the sovereign credit profile.”

India this month changed the way it measures Asia’s largest economy and said under the new methodology the economy expanded 7.5 percent year-on-year during the last quarter, higher than 7.3 percent growth recorded by China in the latest quarter.

As a result, now expected 7.5 percent growth for the year ending in March 2015.

However, the new government readings have left economists confused as it is at odds with other indicators such as industrial production, trade and tax collection figures, which suggest the economy is still suffering from slack.

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