New Delhi – With Indian Finance Minister Pranab Mukherjee’s candidacy for President of India confirmed and his expected resignation as Finance Minister on the horizon, there was still no slowing down of Mukherjee as he minced no words this week in lambasting Fitch Ratings’ downgrading of India’s outlook from stable to negative, explaining in detail the fault lines in the latest ratings.
In a statement issued in New Delhi, the minister said, “While the markets had already anticipated that Fitch would revise the outlook and so there is no surprise in the announcement, it must be pointed out that Fitch has primarily relied on older data, and has ignored the recent positive trends in the Indian economy.”
Minister Mukherjee was candid in explaining that the concerns expressed by Fitch on the economic growth potential, inflationary pressures, and weak public finances were based on earlier data and the government of India had “already taken note of such concerns.”
Citing the announcement from Fitch Ratings, Mukherjee said Fitch reaffirmed India’s long-term Foreign and Local Currency Issuer Default Rating (IDR) at BBB(-) but noted the downward revision of India’s outlook to negative from stable.
The minister noted that Fitch had not considered “many recent structural reforms initiatives taken by the government – such as UIDAI, fertilizer subsidy reform, capping subsidies as a fraction of GDP, new manufacturing policy, new telecom policy etc.”
Listing the positives for the Indian economy, the finance minister said, “RBI has reversed the interest rate cycle by announcing a cut of 50 basis points in April 2012; core inflation has declined significantly from 8.7 percent in May 2011 to less than 5 percent in May 2012; progress has been made on fuel linkage for coal-based power projects; and the quarterly investment growth rate has become positive in the fourth quarter of 2011-12.”
Minister Mukherjee stressed the decline in international oil prices in recent weeks and the absence of any major adverse results on corporate performance in the last quarter of 2011-12 as factors that would have a positive impact on the government’s fiscal position and more generally on India’s economic growth.
Indian Finance Minister Mukherjee, who is expected to resign soon, went on to provide detailed fiscal data in his statement to argue against the Fitch ratings. There was no immediate reaction from the rating agencies. (IATNS)