Indian fisc remains cause for concern: Moody's

Global rating agency Moody's Investors Service today said the central government's fiscal deficit, which in the first quarter of 2006-07 crossed 50% of what was projected for the whole year, is a matter of concern.

"The fiscal deficit does remain a matter of concern, which is why we have kept the local currency rating of the government at non-investment grade Ba2 despite the outlook stabilisation (earlier this year)," Moody's vice president Kristin Lindow told PTI.

Pointing out that the rating agency moved the outlook on the  government's domestic currency rating from negative to stable earlier this year, Lindow said these are long-term ratings, not assessments that would change frequently, and would often remain unchanged for years.

Lindow said Moody's raised the Indian government foreign currency issuer rating to investment grade in February 2005, which was tremendously forward-looking given the potential constraints posed by the weak public finance position and the political conundrum the country faces.

Lindow's remarks were in response to a query whether perception by some analysts is correct that rating agencies sometimes lag behind assessments of market participants.

Recently, Fitch Ratings upgraded India's rating to investment grade, which is interpreted by many as late action on the part of the agency since markets, both global and domestic, have already acknowledged the Indian economy's strong fundamentals.