New Delhi, June 19 (IBNS) Giving a major blow to the Congress-led United Progressive Alliance (UPA) government, rating agency Fitch Ratings lowered the credit outlook of India from stable to negative.
Fitch said it made the revisions in its credit outlook for certain reasons that include corruption, inadequate reforms, slow growth and high inflation.
However, Union Finance Minister Pranab Mukherjee reacted strongly to the Fitch rating and said it took the action on the basis of older data and ignored positive trends.
"While the markets had already anticipated that Fitch would revise the outlook and so there is no surprise in the announcement, it must be pointed out that Fitch has primarily relied on older data, and has ignored the recent positive trends in the Indian economy," Mukherjee said in a statement on Monday.
"In particular, it has not taken note of many recent structural reforms initiatives taken by the Government – such as UIDAI, fertilizer subsidy reform, capping subsidies as a fraction of GDP, new manufacturing policy, new telecom policy etc.
"It has missed the process of strengthening of public finances in India as is evident by, inter-alia, a gradual reduction of government debt/GDP ratio in the last few years, as compared to an increase in this ratio for most of the major economies in the world," he said.
"The concerns expressed by Fitch on the economic growth potential, inflationary pressures, and weak public finances are based on earlier data. Government has already taken note of such concerns," he said.
"Today, Fitch Ratings have issued a press release on India’s sovereign credit rating. Fitch has reaffirmed India’s long-term Foreign and Local Currency Issuer Default Rating (IDR) at BBB(-). It has, however, revised India’s outlook to Negative from Stable," Mukherjee said.
He said: "In their press release, Fitch mentions various positive factors about the Indian economy, such as India’s 'strong economic and credit fundamentals', 'diversified economy', 'high domestic savings', very low 'net external debt', 'high foreign exchange reserves', and that 'underlying drivers of the last decade of rapid economic growth remain in place – a fast growing pool of educated workers and an innovative private services sector'.”
Earlier, credit ratings agency Standard & Poor's had also cut its rating outlook for Asia’s third largest economy.