Taking steps to cut fiscal deficit, Current Account Deficit: Finance Ministry on S&P's threat

NEW DELHI: The government today said it is taking steps to deal with economic issues like fiscal deficit and current account deficit ( CAD), a Finance Ministry official said while responding to the threat of Standard & Poor's to lower India's rating.

"Government is taking lot of steps to ensure that Current Account Deficit (CAD) is under control, fiscal deficit is under control", Finance Secretary R S Gujral said when asked about his comments on the threat of S&P to lower India's investment-grade rating.

Citing economic slowdown and political roadblocks to policy-making, rating agency S&P has warned India could become the first BRIC nation to lose investment-grade rating.

The rating agency, which had cut its outlook on the country's sovereign rating of `BBB-' to negative from stable in April, said this in its report titled `Will India Be The First BRIC Fallen Angel?'

"Setbacks or reversals in India's path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality," S&P's credit analyst Joydeep Mukerji said in the report.

As regards fiscal deficit, Finance Minister Pranab Mukherjee in his Budget for 2012-13 proposed to reduce to 5.1 per cent of the GDP from 5.76 per cent in the previous fiscal.

Driven by rising crude oil prices, higher imports of gold and sudden withdrawal of funds by Foreign Institutional Investors (FIIs), current account deficit during 2011-12 widened to 4 per cent from 2.7 per cent a year ago.

The CAD is the difference between inflow and outflow of foreign currency.

BRIC refers to the high-growth economies of Brazil, Russia, India and China. The other three BRIC members enjoy a higher rating or outlook than India's at present, S&P said.