India makes fresh Fitch pitch for sovereign rating upgrade

India’s government has reiterated its pitch for a sovereign rating upgrade to Fitch, citing strong economic fundamentals, a finance ministry official said after a meeting with the global rating agency on Wednesday.

Fitch rates India as BBB-, the lowest investment grade sovereign rating, with a stable outlook.

The government has assured Fitch that it will bring down the fiscal deficit to 3 percent of gross domestic product (GDP) by 2020-21, the official told reporters, adding it is “conscious” of the impact of a high fiscal deficit on inflation.

The government led by Prime Minister Narendra Modi diverted from a fiscal consolidation roadmap when it announced last month a fiscal deficit target of 3.3 percent for the year 2018/19 starting in April, higher than the 3.0 percent projected earlier.

“India’s sovereign ratings deserves to be upgraded considering strong macro economic fundamentals and a number of reforms,” said the official, who attended the meeting but declined to be identified as it was not public.

Fitch kept its sovereign rating on India unchanged last month following the 2018/19 budget announcement, citing high combined federal and state government debt as a key constraint on the rating.

While rival global rating agency Moody’s Investors Service upgraded India’s sovereign rating in November, for the first time in 14 years, Standard & Poor’s has also kept its rating unchanged.

The official also downplayed concerns over slow revenue collection due to the new goods and services tax, saying that the system will stabilise in the next seven to eight months.

The government also assured Fitch that the country’s debt to GDP ratio will come down to 40 percent in the next few years, the finance ministry official said, a median level for BBB rated sovereigns cited by Fitch.