S&P cuts India currency rating to negative
New Delhi--International credit rating agency Standard & Poor's has downgraded India's sovereign credit rating, for both local and foreign currency, to 'negative' from 'stable' in view of unchecked fiscal deficit and rising domestic indebtedness. In an assessment likely to impact India's economy negatively, S&P also lowered the long-term local currency rating to 'BBB minus' from 'BBB.'

According to an S&P release, India's budget deficit, centre and state together, is likely to exceed 10 per cent of gross domestic product in the current financial year. Total public debt could approach 70 per cent of the gross domestic product or more than 400 per cent of revenues, which is higher than that of most similarly rated countries, the rating agency added.

The rating agency reaffirmed the foreign currency sovereign rating to 'BB', but the outlook has become 'negative' from 'stable.'

The deceleration in GDP growth to about 5 per cent last fiscal year from nearly 7 per cent in the late 1990s reflected structural and cyclical factors, S&P's said, pointing to the slow reforms in the country.
The cost of tardy and shallow reforms was seen in India's poor physical infrastructure, it said, adding chronic power shortages constrained growth the situation was unlikely to improve without a reversal of populists policies, such as provision of free electricity.

Declining growth prospects, in turn, foreshadowed weaker tax revenues and heightened fiscal challenges, the global rating agency said.
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Petroleum APM dismantling may not happen by April 2002
New DelhiNow doubts have arisen on the proposed dismantling of the administered price mechanism (APM) in the petroleum sector by April 1, 2002, as it seems unlikely that the finance ministry will effect duty rationalisation for the oil sector during the current fiscal as demanded by the petroleum ministry.

The finance ministry feels that the exercise cannot be undertaken during the current fiscal as tax collections are already at a historic low. Total tax collection in the first quarter of 2001-02 declined by 12.89 per cent to Rs 32,418.89 crore as against Rs 37,217.16 crore realised during the same period in 2000-01.

Indirect tax mop-up in the first three months of 2001-02 decreased by 6.81 per cent to Rs 24,700.73 crore (Rs 26,505.11 crore).

Excise duty realisation has been marginally higher at Rs 14,377 crore (Rs 14,350 crore) in the first quarter.

Customs duty collections declined by 16.89 per cent to Rs 9,368.44 crore (Rs 11,284.99 crore) during the period April-June 2001.

In case duties are not rationalised during the current year and international prices of crude oil continue to rule at around $27 a barrel, the petroleum ministry has estimated the oil pool deficit will cross Rs 19,000 crore by March 31, 2002.

Finance ministry officials are, however, of the view that any cut in duty rates will aggravate the governments financial problems since this will further reduce revenue collections.
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