India's fiscal policies may not result in rating cut: Fitch

New Delhi, May 10 (PTI) With the next Indian government
expected to take measures to give a fillip to slowing economy,
global rating agency Fitch Sunday said expansionary fiscal
policies by India to battle downturn may not necessarily lead
it to cut its ratings.

"There are counter-cyclical aspects to the expansionary
fiscal position that may not necessarily result in a negative
rating action," Fitch Head of Asia-Pacific Sovereign Ratings
James McCormack told PTI.

The statement assumes significance in the wake of another
global rating agency Standard and Poor's downgrading outlook
of India's long term credit rating in February on rising
fiscal deficit.

McCormack said it is important to remember that fiscal
policy is now being considered in the context of global
economic slowdown.

Fitch will certainly consider the fiscal policies
undertaken by the new government to take a call on reviewing
the rating, since public finance pressures were among the
primary considerations when the country's local credit rating
was placed on negative outlook last year, he added.

Last year, Fitch had cut the outlook to "negative" due to
considerable deterioration in the central government's fiscal
position, combined with a notable increase in government debt
issuance to finance off-budget subsidies.

"Fitch will be focussed more on India's structural fiscal
position, and whether the new government intends to restore
public finances to a more sustainable path on the medium
term," McCormack said.

He said, the agency is waiting for the upcoming report of
the 13th Finance Commission to identify structural fiscal
priorities.

"These will be very important in assessing the
medium-term fiscal outlook," it added.

Finance Minister Pranab Mukherjee in his interim Budget
speech said that the Finance Commission has been asked to lay
down the roadmap for fiscal consolidation.

Fitch said fiscal position is the most significant
negative factor from a rating perspective, but the economy is
clearly facing other challenges.

Most notably, slower economic growth is proving a
challenge, along with the availability of funding for the
corporate sector, which had benefited from international
capital flows that extended to most emerging markets.

"With the flows having stopped, access to capital may
restrict growth further," he said.

India's economic growth slowed down to just 5.3 per cent
in the third quarter of last fiscal, after notching more than
7.5 per cent growth in the first two quarters.

To counter the slowdown, the government has provided
three stimulus packages by reducing excise duty by six per
cent, service tax by two per cent among other things.

This has deteriorated the country's fiscal deficit, with
the figures projected to touch six per cent in 2008-09 against
earlier estimates of 2.5 per cent.

After S&P downgraded India's long term credit rating
outlook, the Finance Ministry asked the agency to explain the
rationale behind the downgrade, while pointing out that
outlook for other nations which had seen soaring fiscal
deficit were left unchanged. PTI BSP
AM
NNNN