Endorsing India's efforts to tame fiscal deficit, Fitch today revised the country's sovereign credit rating outlook to stable from negative that helped halt rupee slide and brought cheer to the government battling slowdown.
The development came as a pleasant surprise and pushed up the value of the rupee, which had touched a low time low of 58.96 against dollar yesterday, to 57.79.
"The revision of the outlook to stable reflects the measures taken by the government to contain the budget deficit, including the commitments made in the FY'14 budget, as well as some, albeit limited, progress in addressing some of the structural impediments to investment and economic growth," Fitch said in a statement.
Revision by Fitch comes within weeks of global agency Standard and Poor's retaining the negative outlook on India.
Last year, both Fitch and S&P had threatened to downgrade India's rating to junk grade in absence of steps by government to contain deficits and promote investment.
Planning Commission Deputy Chairman Montek Singh Ahluwalia said revision by Fitch reflects strengthening of basic fundamentals of economy.
"Basic fundamentals have improved and to that extend, the rating agency's shift in the outlook reflects that. I would like to believe that in the coming months you see a significant improvement in the performance and that should ultimately be reflected in the grading," he said.
Fitch further said it expects the economy to recover after real GDP grew just 5 per cent in 2012-13 versus 6.2 per cent in the year ago period.
"As a result, Fitch is forecasting only a modest recovery with real GDP expected to expand 5.7 per cent and 6.5 per cent in FY'14 and FY'15 respectively," Fitch said.
India's economic recovery, however, is likely to remain slow until a healthier investment climate is created, which helps lift potential growth again, it said.
