| This was stated by Fitch officials today, who pressed for the need to speed up privatisation and reduce government borrowings. |
| "The consolidated fiscal deficit (of central and state governments) of about 9 per cent is quite high, and among the highest in Asia," said Brian Coulton, head of Asia sovereign ratings, Fitch. |
| He added that the global rating agency would undertake a review of India's sovereign rating post the Budget. With the Indian economy faring well, this was the best time for the government to take necessary steps to check the deficit, said Coulton. |
| Fitch's rating review would depend upon the government taking pro-active steps to control and reduce the deficit. Coulton added that the centre had to clamp down on subsidies, privatising assets and widen the tax base. This was essential in order to ensure adequate funds for public infrastructure and investment, he said. |
| "We have been impressed on policies of trade liberalisation, but not so impressed on the fiscal and privatisation side," Coulton pointed out. |
| The fiscal deficit is at 4.8 per cent of the gross domestic produce in 2003-04, and the new Congress-led coalition government has pledged to lower it to 4.4 per cent in the current fiscal year. |
| The December 26 tsunami attack had, however, put an upward pressure on the fiscal deficit, the central bank had stated earlier this month. Preliminary government estimates put the economic cost of the disaster at about Rs 5,300 crore. |
| On the rising capital inflows from foreign financial investors, Coulton said: "While sterilisation efforts remain manageable at this stage, capital inflows will push up inflation and real exchange rates in emerging Asia. Along with an improving investment and private consumption outlook in South East Asia, these trends may characterise Asia's contribution to the rebalancing of global demand," he added. |
| Rating worry |
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