Fiscal reforms, low inflation positive for ratings, says Fitch

Ahead of its annual sovereign ratings review scheduled for next month, Fitch today said that sustained fiscal consolidation, structural reforms and low inflation are positive for the country's ratings.

The agency has a 'BBB-'rating for the country with a stable outlook, which is the lowest investment grade rating, while Moody's has Baa3 and S&P has a BBB- outlook both with stable outlook.

"Sustained fiscal consolidation or fiscal reforms, leading to a decline in the ratio of general government debt to GDP and implementation of structural reforms that raise the potential growth rate are positive for the country's ratings," Fitch said in a report.

The agency said establishing a credible low-inflation environment will also be favourable for the rating.

The agency, however, said a sharp and sustained external shock to foreign and domestic investors' confidence with the potential to cause external financing difficulties, such as an undue change in the monetary policy strategy is a threat for the country's credit rating.

"A rise in the public debt burden caused by discontinuation of adherence to the fiscal policy rule could be negative," it said.

As per the agency, GDP growth is likely to be at 7.4 per cent this fiscal and 8 per cent in the next, based on new series.

It said the government should focus on growth-enhancing reforms such as governance and investment climate; and infrastructure and inflation.