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S&P had, in 2012, scaled down India’s sovereign credit rating outlook in April from ‘stable’ (BBB+) to ‘negative’ (BBB-) — the lowest investment grade and just a step away from ‘junk’ status — and warned the government of a ‘one-in-three’ chance of a rating downgrade to ‘speculative’ within the next 24 months.
India’s economic affairs secretary Arvind Mayaram, who led the discussions with S&P representatives, argued for an upgrade as there was no case for a rating downgrade in the light of the recent decisions taken by India, such as reducing subsidies on petroleum products.
Speaking to reporters after the meeting, Dr Mayaram said: “I think there is a case for an upgrade because we have taken the kind of decisions that most of the countries in the world have not been able to take.
“This country has shown its determination to put the economy back on track. We believe it will happen and there is no doubt about it…We have spoken to them convincingly. We have shown that reforms is on track”.
The government has announced a fiscal consolidation path to reduce the fiscal deficit to 3 per cent of GDP by the 2016-2017 financial year.
The reforms announced by the government so far have focused on increasing FDI and raising administered prices to reduce the fiscal deficit.
The economic secretary also argued that “Petroleum subsidy is around 36 per cent in developed countries and there is no attempt there to reduce that. We are working to eliminate some of the fuel subsidies.”
Dr Mayaram said that the S&P representatives were also told about the government’s resolve to check the fiscal deficit and speed up mega projects to spur growth.
The Indian finance minister has recently announced that more reforms are in the pipeline for the country in the next 2-3 months.
With inputs from Agencies