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    Default Fitch lowers India’s credit rating outlook to negative

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    Another global rating agency Fitch on Monday lowered India’s credit rating outlook to negative, citing corruption, inadequate reforms, high inflation and slow growth as reasons for the revision.

    India faces an “awkward combination” of slow growth and elevated inflation, Fitch said, adding the country also faces structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms.

    Standard and Poor’s (S&P) had in April lowered India’s rating outlook to negative from stable. It also warned on June 11 that the country may be the first in the BRIC grouping to falter and its sovereign credit rating may slip below investment grade.

    “The outlook revision reflects heightened risks that India’s medium to long-term growth potential will gradually deteriorate if further structural reforms are not hastened, including measures to enhance the effectiveness of the government and create a more positive operational environment for business and private investments,” Fitch said.

    The negative outlook also reflects India’s limited progress on fiscal consolidation and, in particular, on reducing the central government deficit despite improvement in the financial health of state governments, it said.

    The government has repeatedly delayed reforms to the tax and subsidy systems, it said, adding, the confluence of weaker economic growth and a large subsidy bill means India will likely miss its 5.1 per cent of deficit target for 2012-13.
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