India reforms "credit-positive" though execution risk remains: Fitch
17 Sep 2012
India's reforms announced last week at first glance appear credit positive, but there is still considerable execution risk given the Congress-led coalition's divisions and recent track record of policy reversals, says Fitch Ratings.
"Broader concerns regarding the weak and inconsistent regulatory framework remain." the ratings agency said in a statement, adding "These concerns will remain material for economic performance ahead of elections in 2014, weighing on the sovereign credit profile."
Fitch assigned Negative Outlooks to India's 'BBB-' ratings in June 2012 (See: Fitch revises India's outlook to negative).
"We await evidence of implementation of the measures on the ground and will also look to see how the economy reacts," it added.
The government has increased the amount of foreign-direct investment permitted in a range of industries and resolved its long-running dispute regarding multi-brand retail foreign-direct investment (FDI). "This demonstrates some commitment to growth-enhancing reforms despite recent political deadlock," Fitch said.
The compromise on retail FDI is to hand over approvals to individual states. These can now grant approval to multi-brand FDI of up to 51 per cent in cities with a population over 1 million as long as at least half of the foreign investment goes toward back-end infrastructure, such as manufacturing, design and distribution.