Fitch Ratings cut its credit outlook for India to negative from stable, nearly two months after rival Standard & Poor’s made a similar call, citing risks that India’s growth outlook could deteriorate if policymaking and governance don’t improve.
The agency estimated general government debt for India of 66 percent of GDP at the end of the most recent fiscal year, compared with a median of 39 percent for BBB-rated countries.
The rupee weakened further to 56 per dollar from around 55.82 before the Fitch statement. Bond yields were range-bound, while stocks were already shut for the day.
Further bad news for traders: RBI dashes hopes of interest rate cut, plunging the Sensex 244 points lower making investors poorer by Rs 75,000 crore, after shares notched up with handsome gains in early trade on the victory of pro-reforms parties in Greece elections.
The interest rate remains at 8% as the RBI pointed to a rise in inflation in May as a key constraint.
The GOI announced last week that the wholesale prices index rose 7.55 per cent in April, as food and fuel prices rose 10.74 percent and 11.53 percent respectively last month.
(Zeenews/Financial Times 18JUN12)