Credit rating agency Standard & Poor's has said it might not downgrade India's sovereign credit rating further, after the government announced plans to reduce the gap between income and expenditure. Currently, India's long term credit rating is at the bottom of the investment grade - 'BBB-minus'.
The agency, at the same time, revised the ratings outlook to "stable" from "negative," indicating potential positive changes to the country's credit fundamentals. Sovereign rating is a tool to measure the risk level of a country's investing environment and shows investors the ability of a country to repay its debts, foreign or domestic.
Finance Minister Pranab Mukherjee, in the Budget for 2010-11, said that the government will reduce its borrowing in the new fiscal and also pegged fiscal deficit to come down to 5.5 per cent of the GDP next fiscal. Fiscal deficit is estimated at 6.7 per cent this fiscal.
"We revised the outlook on the Republic of India to stable from negative," S&P said in a statement from Singapore, while pegging India's economic growth rate at eight per cent for next fiscal. This is in line with the government's own projection.
In February last year, the rating agency had cut the outlook on India's credit rating from stable to negative, as the country's fiscal deficit widened after the government provided stimulus to perk up the economy in the wake of the global financial meltdown. In the Budget 2010-11 last month, the government partially rolled back the stimulus and restored customs duty on crude and raised excise duty on petrol and diesel. The country's short term rating is placed at A-3, which is lower medium grade.
