S&P revises India outlook to negative from stable
Standard & Poor’s Ratings Services (S&P) has revised the outlook on the long-term sovereign credit rating on the Republic of India to negative from stable and has affirmed BBB- rating on India. The outlook revision reflects that India’s fiscal position has deteriorated to a level that is unsustainable in the medium term.
S&P expects general government deficit, including off-budget measures such as oil and fertilizer bonds, to increase to 11.4% in the fiscal year ending March 31, 2009, from 5.7% in the previous fiscal year.
“The government has implemented various policies that increased stress on its fiscal position ahead of the general election, which is expected to be held in May 2009,” said Standard & Poor’s credit analyst Takahira Ogawa. “These policies include debt relief for farmers and a pay hike for government employees–first time in 11 years.”
Higher global oil prices in the first half of 2008 and the global economic slowdown increased the fiscal deficit size further. S&P also said that the deficit will remain high at 11.1% in FY10. Fiscal deficit could widen if next government announces another stimulus package, it added.
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