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The Finance Ministry today ruled out any possibility of downgrade of sovereign ratings of India despite the economic growth slowing to a decade low in 2012-13 and again over four-year low in the first quarter of 2013-14 and assured investors of carrying forward reform agenda.
“On growth, if we are close to 5% this year, I don’t think we have any case for downgrade and we have credible numbers to prove it,” Economic Affairs Secretary Arvind Mayaram said.
He said slowdown was a global phenomenon and that the growth in India would pick up in the coming quarters on the back of a bumper crop which could add 1% to the GDP, pick-up in government expenditure and clearance to large scale infrastructure projects.
Mayaram's statement came on the day when services sector contracted for straight second month, according to widely-tracked HSBC purchasing managers' index. The statement carried with the data clearly said that even second quarter GDP growth would witness a slowdown, faster than even the first quarter.
Mayaram also said foreign investors are beginning to find traction, with foreign direct investment flows in the first quarter this year (April-June 2013) standing at $9 billion, 80% higher over $5 billion in the corresponding period of the last financial year.
“There is a case for greater reforms and deepening of reforms,” he told reporters on board to attend the G20 Leaders’ Summit in St Petersburg. He said structural reforms have taken in the recent past and investors have taken a note of that. Today, the Lok Sabha passed the much-awaited pension reforms bill.
Asked about weakening rupee, Mayarm said India’s current account deficit (CAD) is highest among all the economies and that is contributing to a fall in the rupee. He reiterated the government would contain CAD at 3.7% of the GDP this year and it could be even less. CAD touched the record 4.8% of GDP in 2012-13.
“This belief that it will happen has to be transmitted to the market. That takes a little while,” he said.
The rupee had collapsed to a lifetime low of 68.85 against a dollar last month. The Indian currency has been the worst hit among all emerging markets.However, the rupee today wiped out initial losses, rising 56 paise to 67.07 against a dollar as the Reserve Bank of India is widely expected to usher in new innings under Raghuram Rajan.
Mayaram assured that fiscal deficit was as much a red line as CAD and would be contained. He, however, agreed rising crude oil prices along with rupee depreciation was a matter of concern and the government will continue to take measures to restrict oil imports. The government has targeted to contain the Centre's fiscal deficit to 4.8% of GDP in 2013-14 against 4.9% in the previous financial year.
Asked whether the government would consider importing oil from Iran as it could make the payment to the country in rupee, he said the government intended to remain within the parameters laid down by US sanctions.
