Finmin pitches for rating upgrade even as the rating agency raises concerns over fiscal health

NEW DELHI : Officials of Fitch Ratings expressed satisfaction on the overall macroeconomic situation and assessed that Indian economic situation is better now, Economic Affairs Secretary Arvind Mayaram said.

“I think they expressed satisfaction on the overall macro economic situation. In fact, they also assessed that from the last time they had come, the situation now is much better,” Mayaram told reporters after meeting officials from Fitch Ratings on Monday.

Sources said that the finance ministry pitched for a rating upgrade in a meeting with Fitch officials, even as the rating agency raised concerns on the country’s fiscal health.

In June last year, Fitch Ratings had raised India’s rating outlook to stable from negative, primarily driven by the steps taken by the government to contain fiscal deficit. Fitch currently has a ‘BBB-‘ rating on India.

Even though Fitch raised questions on whether Indian government would be able to adhere to its targets for current account deficit and fiscal deficit, there was “greater confidence” on meeting all targets, Mayaram said.

“…there were questions whether we would be able to adhere to them on CAD and fiscal deficit. Now, there is much greater confidence that those will all be met. On the whole, there is much greater comfort with the macro economic numbers.”

The government aims to curtail fiscal deficit to 4.8% of the gross domestic product for 2013-14 (Apr-Mar). In Apr-Dec, India’s fiscal deficit was recorded at 5.164 trln rupees, touching 95% of the Budget target of 5.425 trln rupees. The government also expects India’s current account deficit to be below $50 bln in the current financial year ending March.

Fitch also raised concerns over non-performing assets of banks, for which the finance ministry officials assured that they are working towards improvement in structural framework, Mayaram said. “They have some concerns on the bank NPAs…it is also a matter of concern to us. But the concern is on account of us wanting our banks to do better than the benchmark…the NPAs, as assessed today, are not anywhere above the benchmark…but we are looking at it and continuously working towards improving structural framework for the banks to be able to do better,” he said.   -Cogencis

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