Fitch Ratings Says Debt Burden Keeps India From Getting A Ratings Upgrade

A day later, when Arun Jaitley, Finance Minister, estimated a financial deficit of 3.5% altering the previous 3.2% target of GDP, the Fitch ratings indicated the rating upgrades of India are constrained due to government’s soaring debt.

The Union Budged for the year 2018–2019 has several policy measures that have the capability to sustain social welfare and economic demand.

Fitch Ratings Says Debt Burden Keeps India From Getting A Ratings Upgrade

These comprise those that led to increase in the income from agriculture and the pushy medical insurance schemes while panning to open new medical institutions.

Thomas Rookmaaker, Director, Sovereign Ratings, Fitch Ratings, said that skillful implementation by spending on these policy measures would probably support a fat slice of the voters and with the general election knocking at the door, this is not inconsequential at all.

He further explained that what limits sovereign ratings of India is its feeble public finance. The debt burden of the government is nearly 68% of GDP and if we include states, the financial balance of GDP’s 6.5%.

The Budget has promised financial deficit at GDP’s 3.5% in the year currently running which will end on March, more than what was targeted earlier—3.2%.

For the upcoming financial year, the deficit estimated to be 3.3% of the Gross Domestic Product.

Rookmaaker said that the commitment of the government to accept Fiscal Responsibility and Budget Management committee’s recommendation to take up maximum 40% of GDP for its debt is constructive, although the momentary delay in connecting makes it doubtful of reaching this debt level by the year 2022–2023, as suggested by the committee previous year.

By pointing towards India’s weak financial position, Fitch, the United States based credit rating agency, last year, in May kept its sovereign rating in the same position at ‘BBB’. This rating specifies that potentialities of default risk are presently low.

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