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Mumbai, July 15 International rating agency Fitch Ratings on Tuesday, downgraded India’s local currency outlook from ‘stable’ to ‘negative’, mainly on account of the deteriorating fiscal position of the Union Government.

However, the agency has reaffirmed the long-term foreign currency outlook at ‘stable’. Fitch’s outlook revision comes a week after Standard and Poor’s, another rating agency, cautioned that India’s sovereign credit rating could be lowered to speculative grade if the country’s fiscal and current account deficit deteriorate and inflation continues to rise.

In statement issued today Fitch said India’s long term currency issuer default rating (IDR) outlook has been revised to negative from stable while affirming the rating at ‘BBB minus’. It has affirmed India’s long-term foreign currency IDR at `BBB minus’ with a stable outlook, its short-term foreign currency IDR at ‘F3’ and the country ceiling at ‘BBB minus’.

The rating agency attributed the negative outlook to an increase in government debt issuance to finance subsidies not captured in the budget. Higher budget subsidies, interest payments, public wages and bonds issued to oil and fertiliser companies could increase the fiscal deficit to 6.5 per cent of GDP in 2008-09, predicts Fitch.

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