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Global rating agency, Standard & Poor's (S&P), move to lower India's rating outlook in April from ‘stable' to ‘negative' may have some “perceptional” impact among foreign investors, said the Finance Minister, Mr Pranab Mukherjee.
This, however, was not a downgrade of India's credit rating, he told the Lok Sabha in a written reply on Friday.
This statement came a day after the Government pitched for a higher credit rating from international rating agency, Fitch, citing good foreign direct investment inflows and commitment for fiscal consolidation.
Mr Mukherjee said the Government was taking steps aimed at fiscal consolidation, improvement in the investment environment, development of the infrastructure and industrial sectors and further development of human resources.
S&P had, in its April report, affirmed India's BBB (-) long-term and A-3 short-term sovereign rating, he said, adding that the rating agency had only revised the outlook on the long-term ratings on India from stable to negative.
This assessment should be viewed in the context of the current economic difficulties that nations are facing, Mr Mukherjee said. Since April 2011, several sovereigns were downgraded, especially by S&P and other major rating agencies. In comparison, India's sovereign ratings have either been affirmed or upgraded in segments, he said.
In their report, S&P had raised concerns about issues such as the level of fiscal deficit and debt burden, increase in the current account deficit and the slowdown in economic growth.
Outlining the fiscal consolidation measures, Mr Mukherjee said these include efforts to restrict expenditure on Central subsidies to under two per cent of GDP in 2012-13 and bring it down to 1.75 per cent of GDP in the next three years.
The Government is also making a determined attempt to reduce the budgeted fiscal deficit to 5.1 per cent of GDP in the Budget estimate of 2012-13 from 5.9 per cent in the revised estimate of 2011-12.
In addition, efforts are being made to enact a direct taxes code and draft a model legislation for goods and services tax, he said.
The measures for development of infrastructure and industrial sectors include launching of the first infrastructure debt fund, allowing tax-free bonds of Rs 60,000 crore for financing infrastructure projects, bringing out a national manufacturing policy and further liberalising external commercial borrowings for some infrastructure sectors.
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