'Weak public finances may hit India's ratings'

MUMBAI: India will suffer a ratings downgrade if government finances worsen, according to credit rating agency Fitch. The combined fiscal deficit for states and the Centre, according to the agency, could widen to 10% of GDP for the second consecutive year.

���The recent deterioration in India���s fiscal position accentuates underlying structural weaknesses in public finances that, if unaddressed, could undermine sovereign creditworthiness,��� said James McCormack, head of Fitch���s Asia sovereigns, in a release issued on Thursday.

Currently, India���s long-term foreign currency and local currency Issuer Default Ratings (IDRs) are ���BBB-��� (or, investment grade). While the outlook on the foreign currency IDR is ���stable���, that on the local currency IDR is ���negative���, which was revised from ���stable��� last July.

Fitch has also given the most pessimistic growth forecast of just 5% for FY10. The government, in an attempt to bailout industries affected by the slowdown, had announced fiscal sops, which led to revenue losses.