S&P lowers India’s long-term rating to negative

Apr 26 ,2012 14:40 PM
S&P lowers India’s long-term rating to negative

Reacting to the outlook revision by Standard and Poor's, Finance minister Pranab Mukherjee said, there is no need to panic. He expressed confidence that the country will overcome the difficulties faced by it. Mukherjee said, a few Bills regarding economic reforms will come up for consideration in the current session of Parliament.

Global rating agency, Standard and Poor's lowered India's rating outlook to negative and warned of a downgrade in two years if there is no improvement in the fiscal situation. The lowering of outlook from stable, to negative is expected to make external commercial borrowings expensive for Indian companies. It may also have implications for the capital market. Reacting to the outlook revision by Standard and Poor's, Finance minister Pranab Mukherjee said, there is no need to panic. He expressed confidence that the country will overcome the difficulties faced by it. Mukherjee said, a few Bills regarding economic reforms will come up for consideration in the current session of Parliament, while some others may be passed in the Monsoon session. Mr. Mukherjee was talking to media persons outside Parliament about reports of slowing of India's economic growth. Last year, Standard & Poor's had stripped the U.S. of its esteemed AAA credit rating.

No need for panic: The Finance Minister Mr. Pranab Mukherjee has said that there is no need to panic in the wake of global rating agency, Standard and Poor's lowering India's rating outlook to negative. Reacting to the Outlook by the agency the Finance Minister expressed confidence that the country will overcome the difficulties faced by it and several bills regarding economic reforms will come up for consideration of Parliament in the current session. He however said some bills may be passed in the monsoon session. The lowering of outlook from stable to negative is expected to make external commercial borrowing expensive for Indian companies. It may also have implications for the capital market.

Commenting on the statement of S & P Rating, CII Director General Chandrajit Banerjee said that in February 2012, S&P had warned that the balance of risk factors for the current sovereign credit rating on India may be shifting to negative. CII is seized of the concerns expressed by S&P in its rating downgrade " viz. high deficit and debt burden of the government. However, CII is of the view that the fundamental strengths of the Indian economy will enable it to carry a higher debt burden for some time. Meanwhile, CII will work with the government in trying to reduce its deficit and meet the targets expressed in the Budget. CII believes that a few key reforms will enable higher growth and investment which will be positive for government revenue while expenditure can be curbed by implementing policies to control and target subsidies.

CII suggests that the Government take measures to push for reforms especially in the areas of FDI, GST and DTC. CII strongly feels that further opening up India in sectors such as Aviation, Insurance and opening up multi brand retailing will help improve foreign capital inflows and also improve investors’ sentiment.  On the fiscal consolidation front CII has suggested measures to augment revenues and rationalize expenditure. CII has also suggested that a public expenditure commission be set up to monitor the efficacy of public expenditure(NSSNS)

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