S&P revises outlook on India to negative

24 Feb 2009 | 14:11 S&P revises outlook on India to negative
Standard & Poor's (S&P) Ratings Services, on Tuesday, 24 February 2009, revised the outlook on the long-term sovereign credit rating on the Republic of India to negative from stable. At the same time, Standard & Poor's affirmed its 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India.

The outlook revision reflects that India's fiscal position has deteriorated to a level that is unsustainable in the medium term. S&P expects general government deficit, including off-budget measures such as oil and fertilizer bonds, to increase to 11.4% in the fiscal year ending 31 March 2009, from 5.7% in 31 March 2008.

Higher global oil prices in the first half of 2008 and the global economic slowdown increased the fiscal deficit size further. With high government debt burden and deficits, its weak fiscal profile has been the single largest negative factor for the sovereign ratings on India, the S&P note added..

Among the mitigating factors, leading to India's upgrade to 'BBB-' rating in January 2007, was the commitment to fiscal consolidation by various levels of government in the country. However, the fiscal slippage highlighted in the government's interim budget announced on 26 February 2009, reverses the consolidation trend and calls into question such a commitment.

India's contingent liabilities are also high. The country's state-owned enterprises (SOEs), including the electricity sector, are generally inefficient. SOEs in oil marketing, fertilizer production, and food handling are more vulnerable to global price changes and more dependent on government financial support, S&P noted.

On the other hand, India's external position is expected to remain resilient. Despite continued dislocation of international capital markets, confidence in India is bolstered by its foreign reserves equal to 374% of short-term external debt.

Comments

Post a Comment

Popular posts from this blog

Asian equities start week on bearish note

12 Jan 2009 | 15:46 Asian equities start week on bearish note Asian equities turned in a mostly bearish performance on the very first session of the week as weak cues from the US markets and continued concerns over the global economic conditions hurt the sentiments. On Friday, the US non-farm payrolls printed a loss of 524000 in December, close to previous estimates of 525,000. For the month of December, unemployment in the world's largest economy rose to a whopping 7.2 percent, the highest rate not seen since 1993. The rise stemmed from losses in every sector category including financial services and manufacturing, the latter, which incidentally showed a trimming of 149,000 positions.  The data also wrapped up the government's layoff count for the year 2008, marking it as the worst for labor since World War II ended in 1945. The US equity markets extended their losing spree and Dow Jones industrial avera
Read more

Asian Market registers convincing recovery

16 Jan 2009 | 16:03 Asian Market registers convincing recovery Stock markets in Asian region closed higher on Friday 16 January 2009, showing some sign of improvement at the end of week convincing recovery from Thursday's big falls. The regional markets followed the gains on Wall Street registered last night. In the region, technology and resource stocks showed some upbeat. On Wall Street, the stock markets showed sign of improvement despite of disappointing economic data, falling crude price and the overall financial sector. The Dow Jones Industrial Average ended higher by 12.3 points at 8,212, the Nasdaq closed higher by 22.2 points at 1,511 and the S&P 500 closed higher by 1.1 points at 843.74. Meanwhile, news of Bank of America might require bailout money to finance the Merrill Lynch acquisition came true as U.S. officials early Friday disclosed they have agreed to provide Bank of America Corporation (BAC) with a
Read more

Strong rally at Wall Street

29 Jan 2009 | 10:04 Strong rally at Wall Street Stocks at Wall Street managed a strong end with good gains on Wednesday, 28 January, 2009. Financials led the way today as Wells Fargo decided that it will keep its dividend intact and will not ask for additional TRP funds. Stocks also rose today after Federal Reserve's latest policy statement. The Dow Jones Industrial Average ended higher by 200 points at 8,375, the Nasdaq closed higher by 53 points at 1,558 and the S&P 500 closed higher by 28 points at 874. Citigroup, Wells Fargo and Bank Of America were the main Dow winners today. In the earning arena today, Boeing and AT&T reported unimpressive quarterly results. WellPoint's latest earnings were in-line with expectations. Yahoo! and ConocoPhillips both topped earnings estimates. Today, The Federal Open Market Committee kept its interest rate target in a range of zero to 0.25%, as expected. It
Read more