Government efforts to avoid "fiscal pump-priming" ahead of general elections, so as to achieve the fiscal deficit target of 4.8 per cent of the GDP in 2013-14, are supportive for the country's credit rating, Fitch Ratings said today.
"I think the authorities generally have resisted the temptation to engage in fiscal pump-priming ahead of elections this year, which is supportive for the credit profile," said Andrew Colquhoun, Head of Asia-Pacific Sovereign Ratings for Fitch Ratings, during a conference call.
He warned however that any slippage on the fiscal front will be negative for country's credit ratings.
The agency also hinted at being supportive of the RBI's fight to curb inflation by hiking key interest rates.
"Substantial (fiscal) slippage will be negative factor for our view. So too would be the relaxation of central bank's efforts to contain inflation," Colquhoun said.
A sharp deterioration in banking sector's asset quality can also be a downside to the country's credit rating, he added.
For the first eight months of the current financial year, 2013-14, fiscal deficit has already reached 94 per cent of the budgeted target.
Finance Minister P Chidambaram has been saying that all efforts would be made to restrict the fiscal deficit to 4.8 per cent the GDP in 2013-14.
The rating agency in its recent report 'Asia-Pacific Sovereign Credit Overview' had said the government would have to go for greater expenditure cuts in the remainder of the financial year to meet its fiscal deficit target.
Colquhoun said the credit rating agency will wait for next government's policies before determining the future rating.
"We wait to see what shape the next government will take and what their policy strategies would be. Now it will be important information for determining future outlook for India's rating," he said.
The next Lok Sabha elections are to be held in April-May.
Colquhoun said the main question in terms of the country's rating would be policymakers' commitment to sustainable growth without external imbalances or higher inflation.
