Weak public finances strain India’s rating upgrade: Fitch

Government’s reform initiatives have unlocked Indian “economy’s dynamism” but weak public finances continue to remain a strain on any rating upgrade, global ratings firm Fitch said on Monday.

Fitch said it had on April 9 affirmed India at BBB-/Stable rating.

“Government reforms have helped to unlock the economy’s dynamism. However, weak public finances continue to constrain the ratings,” Fitch said in a Asia-Pacific Sovereign Overview 2Q’15 report today.

“Measures to strengthen the revenue base remain lacking,” it added.

In April, the ratings agency had retained India’s credit outlook at ‘stable’ and said although dynamism was back in the economy, translation of reforms into higher growth would depend upon actual implementation.

Government aims to limit fiscal deficit to 3% of the GDP by 2016-17.

While on the other hand, it is also taking steps to maximise revenue collection by various measures.

For indirect tax collection, it has taken additional measures including the Central Excise increase on diesel and petrol, increase in clean energy cess, and the withdrawal of exemptions for motor vehicles and consumer durables.

India’s indirect tax collections during the first two months (April-May) of the current financial year increased to Rs 96,128 crore, from Rs 69,069 crore during the same period in 2014-15, a 39.2% increase.


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