Reacting to the S&P recent report suggesting that India could be the first BRIC country to falter, Pranab Mukherjee said that between April 2012 and now, there are no significant events to indicate that the economy’s vulnerability to shocks has increased, though growth numbers for the fourth quarter 2011-12 have come below the expectations. He said that S&P’s recent report suggests that the main factor that would determine India’s investment grade credit rating is the “government`s reaction to potentially slower growth and greater vulnerability to economic shocks.”
Defending the economy, Mukherjee noted that RBI has reversed the interest rate cycle by announcing a cut of 50 basis points at its last review of monetary policy; mining sector growth has turned around, progress has been made on fuel linkage for coal based power projects; there is a turnaround in the quarterly investment growth rate, which had been negative in the third quarter of 2011-12; a normal south west monsoon has been predicted for 2012-13 and there has been a decline in international oil prices in recent weeks.
In addition, Foreign Institutional Investors (FII) have reposed faith in the Indian economy and had already poured in net USD 12 billion in the first five months of the current calendar year (up to June 9, 2012) as against an FII inflow of USD 8.3 billon in the full calendar year 2011. He added that this is the highest net FII inflows in the last five years for the corresponding period. Similarly, the fiscal year 2011-12 has witnessed gross FDI flows of USD 46.8 billion, as against USD 34.8 billion in the fiscal year 2010-11.