India pitches for Moody’s rating upgrade: sources
NEW DELHI |
NEW DELHI (Reuters) – India has pitched for an upgrade to its sovereign rating, citing what it believes are strong economic fundamentals, despite concerns by rating agency Moody’s that New Delhi will overshoot its fiscal deficit targets for the current fiscal year, finance ministry sources told Reuters on Monday.
A team of executives from Moody’s Investors Service met senior officials of the finance ministry as part of the review process for sovereign ratings, sources said.
The meetings, mainly with officials from the Department of Economic Affairs, will continue on Tuesday where officials from the Department of Financial Services will be involved.
Finance ministry officials told Moody’s that on several indicators India has outperformed its peers with the same Baa3 rating, the lowest investment-grade rating, with a stable outlook, and so deserves a higher rating.
“India has a low external debt to GDP ratio, high foreign exchange reserves, low external debt service ratio, deep domestic capital markets and diversified domestic holdings of sovereign debt,” the ministry said in a presentation to Moody’s and seen by Reuters.
A higher sovereign debt rating lowers India’s cost of borrowing. India’s total external debt rose to $317 billion at the end of June, compared with $306 billion at end-March 2011, the central bank said in a statement on Friday.
Moody’s expressed concern with India’s fiscal deficit, one of the sources said.
India aims to pare its fiscal deficit to 4.6 percent of GDP for the fiscal year that ends in March, a target that seems increasingly out of reach as growth slows and as share sale plans in state firms are thwarted by weak markets.
Some policymakers have said achieving the target will be a challenge, while others have said the government still aims to reach its goal.
“They have concerns in the area of fiscal deficit and are worried that India may overshoot its fiscal deficit target,” a senior finance ministry official told Reuters.
India has budgeted roughly $30 billion in food, fuel and fertiliser subsidies for the fiscal year, a figure that could rise further if energy prices remain elevated and the government enacts a food security law, further straining federal finances.
The finance ministry sought to counter Moody’s criticism of India’s fiscal position, citing its decision to free up gasoline prices, moves towards allowing 51 percent foreign ownership in multi-brand retail, relaxing rules for overseas borrowing, and pending legislation including a land acquisition bill.
Moody’s last week cut its outlook for India’s banking system to “negative” from “stable”, and warned that slowing growth at home and overseas were hitting asset quality, capitalisation and profitability.
A senior analyst for Moody’s said in Singapore on Monday that the meeting with the Indian finance ministry officials were part of a “regular annual visit” that the agency has with all governments globally.
(Writing by Abhijit Neogy; editing by Malini Menon)
Article source: http://feeds.reuters.com/~r/reuters/INbusinessNews/~3/Gx-7DUZ42ms/idINIndia-60517920111114
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