Fitch downgrades India’s outlook to negative

An Indian vendor waits for customers at a wholesale vegetable market in Mumbai, India, Monday, June 18, 2012. Fitch Ratings downgraded India's credit outlook from stable to negative Monday, saying that the country's growth potential will deteriorate without a quickening of structural reforms. AP PHOTO/RAJANISH KAKADE

MUMBAI—Fitch Ratings downgraded India’s credit outlook from stable to negative Monday, saying that the country’s growth potential will deteriorate without a quickening of structural reforms.

The latest blow to India’s economy follows a similar downgrade by Standard & Poor’s in April, with both agencies maintaining India’s rating at BBB- but raising concerns over flagging growth and troublesome deficits.

A statement from Fitch called for measures to create a more positive environment for businesses and private investments.

“The Negative Outlook also reflects India’s limited progress on fiscal consolidation and, in particular, on reducing the central government deficit despite improvement in the financial health of state governments,” it said.

Earlier on Monday, India’s central bank policy-makers surprisingly kept interest rates unchanged in a bid to curb inflation, despite pressure to cut the cost of borrowing to help boost growth.

The statement from Fitch said it “notes that India faces an awkward combination of slowing growth and still-elevated inflation.”

Asia’s third-largest economy is facing a raft of economic woes including plummeting investor confidence and GDP growth of just 5.3 percent in January to March, its slowest quarterly expansion in nine years.

Standard & Poor’s warned this month that India could be the first of the BRIC major emerging economies to lose its investment-grade debt classification unless it revived growth and rekindled its reform agenda.

Read more...