Highlighting structural reform, improving economic prospects and fiscal discipline, the government has made strong pitch for sovereign ratings upgrade to global rating agency Fitch, which has kept the country’s ratings unchanged for more than 11 years.
The government has assured the rating agency that they will stick to the fiscal consolidation path and will lower the fiscal deficit to 3% of the GDP by 2020-21, noting that the current fiscal deficit target slippage was due to Goods and Services Tax (GST) as just 11 months of GST revenues accruing to the government instead of full 12 months. Further, the government expressed confident saying that the new indirect tax regime has almost stabilized and revenue collection will rise in the next 7-8 months, after e-way bill and invoice matching starts.
The government also assured Fitch that the country’s debt to GDP ratio will come down to 40 percent in the next few years and added that they will introduce amendments to the FRBM Act in the ongoing Budget session of Parliament, specifying the consolidation road map. According to the road map, the fiscal deficit will be lowered to 3.3% in the next fiscal, to 3.1% in 2019-20 and 3% by 2020-21. Besides, Fitch had last upgraded India’s sovereign rating from BB+ to BBB- with stable outlook on August 1, 2006 and is due for an annual review in a couple of months.