Modi government makes fresh Fitch pitch for rating upgrade

India has made a pitch to ratings agency Fitch for a sovereign upgrade, pointing to structural reforms and sound macroeconomic indicators.

The New York City headquartered agency had last upgraded India’s sovereign rating from BB+ to BBB- with stable outlook on August 1, 2006. Moody’s Investors Service had in November last year upgraded India’s rating one notch from ‘Baa3’ to ‘Baa2’, the first such upgrade since 2004. S&P has maintained ‘BBB-’ rating on India since 2007.

Ateam of finance ministry officials led by economic affairs secretary Subhas Chandra Garg, chief economic advisor Arvind Subramanian and principal economic advisor Sanjeev Sanyal made a pitch to Thomas Rookmaaker, director, sovereign ratings at Fitch on Wednesday.


The government clarified that the fiscal slippage against the budget target for the current fiscal was because of one month less of goods and services tax (GST) revenues.

GST payments become due in the following month, which means taxes for March will accrue in the next fiscal in April, leaving the government with one month less of tax in current fiscal.

The government has revised the fiscal deficit target for current year to 3.5% of GDP from 3.2% initially budgeted. The fiscal deficit for next year is pegged at 3.3% of GDP against 3% seen in the fiscal consolidation roadmap. The 3% target is now set to be achieved by FY21.

Fitch also sought information, according to people aware of the matter, on GST and fraud at Punjab National Bank. The government said GST has more or less stabilised and revenue collections should pick up pace once the e-way bill is rolled out. Indian economy grew 7.2% in October-December 2017, the fastest in five quarters, and surpassing China’s 6.8% in the same period.

In its comment on the budget for 2018-19 presented by finance minister Arun Jaitley on February 1, Fitch had cited high debt burden of the government as constraint to India’s rating upgrade.

The Centre’s debt-to-GDP ratio is about 50%. The government plans to reduce it to 40% by 2024-25.