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India’s Outlook Downgraded by Fitch

in International Business

India’s Outlook Downgraded by Fitch

Ratings agency Fitch lowered India’s outlook, given the country’s deteriorated economic growth.

The agency finds India’s economy facing “heightened risks” due to structural challenges in its investment climate in the form of corruption and inadequate economic reforms.

The government has done very little to reduce the budget deficit.

This report comes a few days after Standard & Poor’s warned that India could lose its investment grade status.

India’s economy expanded at a rate of 5.3% in the first quarter, the slowest pace in 9 years. Economists have predicted further downturn in the economic pace in the near term amid increased global volatility.

The central bank has failed to take measures to boost spending, as the consumer prices have remained stubbornly high.

On Monday, the Reserve Bank of India reported interest rate unchanged at 85 in a surprise move despite slowing growth. The Bank cited the inflation being the cause behind the move.

Kaushik Basu, India’s chief economic adviser said Fitch’s move to match S&P’s outlook cut on India’s debt rating wasn’t worrying because there is a tendency among ratings agencies “to look over their shoulder and see what others are doing.” Still, he said, it would be “foolish” to dismiss the agencies since “others take them very seriously.”

Fitch based its ratings on the ‘awkward combination of slowing growth and still-elevated infaltion’. Furthermore, the government has also been unable to reduce borrowing. India’s public finances are “a key rating weakness” compared to peers with its same sovereign rating, Fitch said in a statement.

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