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  3. S&P’s move to lower outlook on India’s rating a timely warning; no reason to panic: FM

S&P’s move to lower outlook on India’s rating a timely warning; no reason to panic: FM

26 Apr 2012 Evaluate

Reacting to Standard & Poor’s (S&P) negative outlook on the Indian economy, the Finance Minister Pranab Mukherjee has stated that it is a timely warning but there is no need to get panic as the government is committed to economic reforms. He further reassured the country that the economy will grow around the 7% mark this year and the fiscal deficit shall be controlled to 5.1% of the GDP.

The government will take note of S&P’s decision and work to push economic reforms for greater growth. Also the process of reforms and the administrative decisions required to ensure that the fiscal deficit is retained at projected level would be taken.

The FM has admitted to the fact that there has been a delay in passing certain financial sector reforms but they will definitely be taken up in the next session of Parliament. The government will also discuss the Direct Taxes Code (DTC) Bill and other legislations that have received the approval of the standing committee.

Prime Minister’s Economic Advisory Council Chairman C Rangarajan has also stated that the S&P action is just one perception. It is just a downgrade in outlook and things might change if India can prove to the world that its economy can grow at 7% plus and can contain its fiscal deficit.

The credit ratings agency, S&P revised India’s economic outlook to negative. The reason cited for the downgrade was the large fiscal deficit, low expectations of economic reforms and a slowing down of GDP growth. S&P has gone a step ahead and said that there is at least one-in-three likelihood of a ratings downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting (in the next two years).

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