Despite the growing foreign exchange reserves at almost $70 billion and a healthy GDP growth of 5.8 per cent in the second quarter of the current fiscal, global rating agency Standard & Poor’s has maintained its ‘negative’ outlook and the junk ‘bb’ rating on India’s foreign currency.The growing fiscal burden of both the States and the Centre has been a major cause for the rating agency to maintain its negative outlook. In fact, S&P has cited the worsening fiscal situation for retaining the ‘bb’ for foreign currency long-term rating and ‘bb+’ rating for local currency, as assigned by it in September last. Govt views S&P rating positively New Delhi: Government said that S&P, although it maintained a ‘negative’ outlook and junk rating on India’s foreign currency, has in fact commended India’s efforts to strengthen Sebi and speed up reforms by passage of several crucial economic bills. “But for the fiscal inflexibility, the S&P has in fact commended government’s efforts in strengthening stock market regulations and the passage of several legislations including Securitisation Bill and UTI restructuring in winter session of Parliament,” an official spokesperson told PTI. However, the government regretted that the rating agency had not taken into the account the century’s worst ever drought in the country and the steps taken by the government to keep prices stable and inflation rate under control, the spokesperson added. PTI ‘Political compulsions are likely to prevent significant fiscal adjustment through reduced government spending, placing the burden of change on the revenue side,’ S&P said in a statement on Wednesday. S&P had earlier cut India’s ratings following government decision to defer disinvestment for oil PSUs.S&P has also warned that general elections in 2004 and opposition from some coalition partners to divest PSUs may impede the government’s effort to achieve the fiscal deficit target of 5.3 per cent of GDP this fiscal. India, which planned to mop up Rs 12,000 crore from disinvestment this fiscal, was able to raise only Rs 4,000 crore so far. Tax:gdp ratio was one of the lowest among the countries rated by S&P, it said, adding the consolidated debt was a staggering 80 per cent of GDP and interest payments are expected to eat up half the government’s revenue. Still, India is speeding up reforms by strengthening stock market regulator, amending outdated labour and company laws, empowering lenders to seize and sell assets and building and building up forex reserves to boost overseas investors confidence, it added.Moody’s Investors Service said last month it may upgrade India’s ratings by mid-February after it completes a three-month review of India. It currently rates India’s foreign-currency debt at ‘ba2’, two levels below investment grade.
