India’s rating shouldn’t come under pressure due to higher deficit: DEA Secretary

India’s sovereign rating mustn’t come under pressure due to surge in fiscal deficit which was primarily on account of higher expenditure to take care of the COVID-19 pandemic, stated Economic Affairs Secretary Tarun Bajaj.

Given the credibility of the numbers projected within the Budget, he hoped that the worldwide rating businesses would retain India’s sovereign rating on the current ranges.

As per the most recent Budget numbers, India’s fiscal deficit is estimated to be 9.5% of the GDP within the present fiscal and is predicted to come down to 6.8% in 2021-22 starting April 1.

As a results of the impression of the pandemic on the economic system, there was moderation in tax assortment and a rise in authorities expenditure leading to higher borrowing of ₹12.8 lakh crore from the market.

“I don’t think that rating will be under pressure because every country across the world was impacted by the COVID-19 pandemic. This crisis was not only limited to India. Our recovery is faster than in the Western world. The Budget projects a nominal GDP growth rate of 14.5%,” Mr. Bajaj informed PTI in an interview.

“They should look at our Budget and the reforms the government has undertaken. The government will engage with them and explain the numbers. We hope that they retain the ratings,” Department of Economic Affairs (DEA) Secretary stated.

Last month, the Economic Survey 2020-21 noticed that India’s sovereign credit score scores don’t replicate the economic system’s fundamentals pitched for sovereign credit score rating methodology to be made extra clear and fewer subjective.

“Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated as the lowest rung of the investment-grade (BBB-/Baa3). While sovereign credit ratings do not reflect the Indian economy’s fundamentals, noisy, opaque and biased credit ratings damage FPI flows,” the survey stated.

“Past episodes of rating changes have no or weak correlation with macroeconomic indicators… India’s fiscal policy, therefore, must not remain beholden to a noisy/biased measure of India’s fundamentals and should instead reflect Gurudev Rabindranath Thakur’s sentiment of a mind without fear,” it stated.

Global rating businesses have the bottom investment-grade rating on India, which is simply above the junk standing.

In June, Fitch Ratings revised India’s outlook to “negative” from “stable” and affirmed the rating at “BBB-”, stating that the coronavirus pandemic has considerably weakened the nation’s progress prospects for the yr and uncovered the challenges related to a excessive public-debt burden.

Moody’s Investors Service had downgraded India’s sovereign rating to “Baa3” from “Baa2”, saying there can be challenges within the implementation of insurance policies to mitigate dangers of a sustained interval of low progress and deteriorating fiscal place.

S&P Global Ratings retained the “BBB-” rating for India for the thirteenth yr in a row in June final yr.