Fiscal deficit remains cause for concern: Moody's

NEW DELHI: Global rating agency Moody's Investors Service today said the Centre's fiscal deficit, which in the first quarter of 2006-07 crossed 50 per cent of what was projected for the whole year, is a matter of concern.

"The fiscal deficit does remain a matter of concern, which is why we have kept the local currency rating of the government at non-investment grade Ba2, despite the outlook stabilization (earlier this year)," Moody's senior official Kristin Lindow told the agency.

Pointing out that the rating agency moved the outlook on the government's domestic currency rating from negative to stable earlier this year, Moody's Vice President-Senior Credit Officer Sovereign Risk Unit said these are long-term ratings, not assessments that would change frequently, and often they would remain unchanged for years.

Lindow said Moody's raised the Indian government foreign currency issuer rating to investment grade in February 2005, which was tremendously forward-looking given the potential constraints posed by the weak public finance position and the political conundrum the country faces.

Lindow's remarks were in response to a query whether perception by some analysts is correct that rating agencies sometimes lag behind assessments of market participants.

Recently, Fitch Ratings upgraded India's rating to investment grade, which is interpreted by many as late action on the part of the agency since markets, both global and domestic, have already acknowledged Indian economy's strong fundamentals.