GDP growth will improve to 5.5% in FY15: Fitch Ratings

Fitch Ratings affirmed India’s sovereign rating at ‘BBB-’ with a stable outlook even as it projected the country’s growth to improve to 5.5 per cent in 2014-15 (FY15).

‘BBB-’ ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

Pointing out that the course of the Indian economy is uncertain in view of the on-going Parliamentary elections, the global rating agency forecast real GDP growth to rise from 4.7 per cent in FY14 to 5.5 per cent in FY15 and 6 per cent in FY16. “Once the next coalition starts implementing its economic policies, it will become clearer whether the economy can return to a higher sustainable growth path or whether it remains stuck at current levels.

“A policy push that includes structural and governance reforms, fiscal consolidation and efforts to rein in inflationary pressures would likely require a coherent coalition with a strong electoral mandate,” Fitch said in a statement.

Fitch said the Centre seems to have met its Budget deficit target of 4.8 per cent of GDP (including privatisation receipts) for FY14, despite the looming elections.

“But this (budget deficit target) was only achieved through substantial one-off measures…” it said.

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