The Hindu : Business : S&P revises India's outlook to positive

Online edition of India's National Newspaper
Thursday, Apr 20, 2006

Business

Business

S&P revises India's outlook to positive

Special Correspondent

Exim Bank, RFC and PFC ratings upgraded

MUMBAI: Standard & Poor's (S&P) Ratings Services on Wednesday revised the outlook on India to positive from stable. At the same time, the `BB+/B' ratings on the sovereign were affirmed.

"The outlook revision reflects improved prospects of a stabilising debt burden based on greater effort across all levels of governments to consolidate their fiscal positions,'' said Standard & Poor's credit analyst Ping Chew.

The Central and State governments (general government) have increased efforts to rein in their budget deficits. The Central Government's 2006-07 budget puts fiscal consolidation back on track, while the assessment on State governments comes in the wake of better-than-expected fiscal outlook.

The general government deficit is expected to fall below 8 per cent of 2006 GDP from 10 per cent in 2002.

Going forward, tax measures — including expanding VAT and service tax — and tightening tax administration should result in more buoyant government revenues, especially as the highly taxed industrial sector grows more robustly and as the service sector is taxed. Coupled with operating expenditure control, more efficient spending, and implementation of fiscal responsibility laws, India should see a steady reduction of general government deficits and a falling debt burden, Standard & Poor's stated. Reflecting the outlook on the sovereign credit ratings on India, Standard & Poor's revised the outlooks on Export-Import Bank of India (Exim Bank), Indian Railway Finance Corporation (RFC) and Power Finance Corporation Ltd (PFC) to positive from stable.

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