The Government has pitched for higher credit ratings from international rating agency Fitch.
Senior Finance Ministry officials on Thursday, held discussions with senior officials from the rating agency.
Interestingly, the Government had taken the same line when its officials met with another rating agency, Standard and Poor's (S&P). Far from an upgrade, S&P revised the outlook from ‘stable' to ‘negative.' This outlook revision reflects at least a one-in-three likelihood of a downgrade in the future.
A senior Finance Ministry official said, “We pitched for a rating upgrade. We told them look at the FDI inflows, look at the returns in the market. We said we are committed to capping subsidy at 2 per cent.” The agency is likely to come out with its assessment within a month.
Fitch had last rated India in 2010, giving India's foreign and local currency a ‘BBB-/stable' rating. Last year, the agency had affirmed the ‘BBB-' rating for India indicating moderate degree of safety regarding timely servicing of financial obligations. This is the lowest investment grade rating issued by Fitch.
The Government official said that with FDI inflow at its highest and FIIs pumping money into Indian markets, the country is an able candidate for a ratings upgrade. Since 2011, Fitch has downgraded all major economies in the world.
Asked if Fitch raised concerns over the burgeoning current account deficit (CAD), which arises when import of goods and services exceeds a country's exports, the official said that with high inflow of foreign funds, CAD is expected to be high.
“When you have this kind of inflow, a high CAD is normal,” he said. CAD had touched four per cent of GDP at the end of December 2011.
The FDI into India in the last fiscal was around $36.50 billion (around Rs 1.82 lakh crore). Besides, FIIs have put in around $12 billion into the Indian markets in the last two months.