S&P revises India outlook from Negative to Stable

Standard & Poor's Ratings Services today said that it had revised the outlook on India to stable from negative.

"At the same time, we affirmed the 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India," it said in a statement.

The revision in outlook reflects S&P's view that India's fiscal position could now begin to recover and that its economy will remain on a strong growth path. The government budget targets a general government (including central and state governments) deficit of 8.3 per cent in the fiscal year ending 31 March 2011 from 9.8 per cent in the previous fiscal year.

The government intends to follow the medium-term fiscal consolidation plan outlined by the 13th Finance Commission. The Commission recommended that general government deficit be reduced to 5.4 per cent of GDP and the ratio of general government debt to GDP be lowered to 68 per cent of GDP by the fiscal year ending 2015.

The government's decision, in February 2010, to change its fertiliser policy to implement a nutrient-based pricing policy and to raise urea prices by 10 per cent from April 2010 is a step forward for the reduction of subsidies. The budget also announced an average increase in the prices of domestic petroleum and diesel of 6.0 per cent and 7.8 per cent respectively.

"We expect India's GDP growth to be 8.0 per cent in fiscal year ending 31 March 2011, which is higher than many other countries' and exceeds our previous expectation," said Standard & Poor's credit analyst Takahira Ogawa. In addition, Standard & Poor's views India's external position as resilient. We expect the country's ratio of gross external financing need to current account receipts plus international reserves to remain stable at 77 per cent in fiscal 2010.