BJP’s victory marks an easing of political uncertainty: Fitch Ratings

The BJP’s landslide victory marks an easing of political uncertainty and is likely to improve business sentiment and the outlook for private investment, says Fitch Ratings.

“We expect the government to remain reform-minded, as the BJP’s manifesto highlighted the aim to improve the business environment and governance standards, strengthen infrastructure, and stimulate the manufacturing sector through a new industrial policy,” said Thomas Rookmaaker, Director in Fitch Ratings’ Asia-Pacific Sovereigns team.

Another area of potential reforms, according to Rookmaaker, is to enhance the efficiency and effectiveness of government administration, and the legal and judiciary system.

This will allow the government to solidify reforms of its first term, for instance by further enlarging the tax base and improving the credit culture.

“Of particular importance from a credit perspective will be the extent of the next government’s efforts to improve the country’s weak fiscal finances. Fiscal consolidation stalled under the BJP in recent years, and its campaign promise to support farmers’ income has added to spending pressure,” he said.

Fitch expects the fiscal deficit to remain manageable in the next few years, but it has seen little indication so far that the government will pursue significant deficit reduction of the order needed to meet the general government debt ceiling of 60 per cent of GDP by March 2025 as mandated by the FRBM Act.

COMMENT NOW