Fitch downgrades India’s outlook to negative

 

 After Standard & Poor’s negative rating for India investment grade-debt it is now the turn of  Fitch Ratings downgraded India’s credit outlook from stable to negative Monday, saying that the country’s growth potential will deteriorate without a quickening of structural reforms.
The latest blow to India’s economy follows a similar downgrade by Standard & Poor’s in April, with both agencies maintaining India’s rating at BBB- but raising concerns over flagging growth and troublesome deficits.A statement from Fitch called for measures to create a more positive environment for businesses and private investments.
“The Negative Outlook also reflects India’s limited progress on fiscal consolidation and, in particular, on reducing the central government deficit despite improvement in the financial health of state governments,” it said.
Retail inflation moved up marginally to 10.36 percent in May on account of increase in prices of vegetables, edible oils and milk, inflation rates for rural and urban areas were 9.57 percent and 11.52 percent respectively in May.

Based on the Consumer Price Index (CPI), the inflation for April was revised to 10.26 per cent from the provisional estimate of 10.32 per cent, as per the government data released in New Delhi on Monday.

Vegetable prices recorded the maximum spurt in prices, up 26.59 per cent, followed by edible oil 18.21 per cent and milk products  13.74 per cent in May, year-on-year basis.

Prices of egg, fish and meat shot up 10.50 per cent, while non-alcoholic beverages became costlier 9.44 per cent.

Among other items, prices of cereal and its products saw a rise of 4.79 per cent over the May 2011 level.

While sugar saw a marginal rise of 5.38 per cent in May, ‘pulses and products’ were up by 7.89 per cent, over the same month in2011.

Prices of fuel and light, and clothing, bedding and footwear segments remained in the double-digit.

Inflation rates for rural and urban areas were 9.57 per cent and 11.52 per cent respectively in May.

India’s central bank policy-makers surprisingly kept interest rates unchanged in a bid to curb inflation,
despite pressure to cut the cost of borrowing to help boost growth.The statement from Fitch said it “notes that India faces an awkward combination of slowing growth and still-elevated inflation”.
Asia’s third largest economy is facing a raft of economic woes including plummeting investor confidence and GDP growth of just 5.3 per cent in January to March, its slowest quarterly expansion in nine years.
Standard & Poor’s warned this month that India could be the first of the BRIC major emerging economies to lose its investment-grade debt classification unless it revived growth and rekindled its reform agenda