India cites reforms, asks S&P to consider an upgrade

Earlier, S&P and Fitch Ratings had warned of downgrading India's rating

India today presented a case for its rating to be upgraded by Standard & Poor's (S&P). Currently, S&P has accorded the lowest investment grade rating to India.

Earlier, S&P and Fitch Ratings had warned of downgrading India's rating.

Economic Affairs Secretary Arvind Mayaram said there was no case for a rating downgrade, as the government had taken bold and tough decisions such as reducing subsidies on petroleum products. "I think there is a case for an upgrade because we have taken the kind of decisions most countries in the world have not been able to take. This country has shown its determination to put the economy back on track. We believe it will happen and there is no doubt about it," he told reporters after meeting S&P officials.

He said 36 per cent of the global subsidies on petroleum products were given by developed countries, adding India had started phasing out such subsidies. He added S&P representatives were informed the government resolved to check fiscal deficit and hasten mega projects, including clearances by the Cabinet Committee on Investment (CCI).

In recent weeks, CCI has cleared projects worth billions of dollars.

"We have spoken to them convincingly. We have shown reforms are on track," he said. A similar meeting was held with Fitch officials on April 12.

After Union Budget 2013-14 was presented, S&P and Fitch Ratings had said India's sovereign rating was unaffected. However, they had warned policy execution and controlling subsidies would be key risks during the year. Currently, S&P has a 'BBB-' for India, the lowest in the investment grade, with a negative outlook. While Fitch has assigned India the lowest grade in the investment category, with a negative outlook, Moody's has accorded India the lowest rating in the investment grade. However, Moody's rating doesn't carry with it a negative outlook. If these ratings are further downgraded, it would mean India is a risky country for investment.

On the proposed food security Bill, Mayaram said, "We are very confident that we are on the right track." On investments, he said there was an up-tick in capital goods since October. "It is in anticipation of investments…we believe the Rs 70,000 crore worth of projects which have been approved...The investments will begin to happen now," he said.

In recent months, the government has undertaken several reform initiatives such as liberalising foreign direct investment norms for various sectors. It had opened the multi-brand retail sector to promote investment. To check the rising subsidy bill, it had also partially decontrolled diesel prices and capped subsidised liquefied petroleum gas cylinders.