Fitch affirms India's BBB- ratings; outlook stable

April 23, 2014

Ratings agency Fitch affirmed following Ratings/ Outlook for India:

India’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs): “BBB-“
India’s senior unsecured foreign and local currency bonds: “BBB-“
Outlooks on the Long-Term IDRs: “Stable”
India’s Ceiling: “BBB-“
Short-Term Foreign Currency IDR: “F3”

Key Rating Drivers for India:

Relatively high real GDP growth (5-year avg is 6.7% compared to median of 3.2% for other ‘BBB’ rated peers)
Lost much of its dynamism
Fitch forecasts real GDP growth to rise from 4.7% in FY14 to 5.5% in FY15 and 6.0% in FY16
Due to the on-going parliamentary elections, course of the Indian economy is timid
General Government budget deficit of the Centre and the States combined (7.3% of GDP) much higher than median for other ‘BBB’ category peers
India’s standards of governance and business environment are comparatively weak and tighten its investment potential
Inflation is high at a 5-year avg of 10.2% compared with median of 4.2% for other ‘BBB’ peers
External position is strong, owing to high level of Forex of USD 304 billion (6.1 months of current account receipts cover compared to median of 4.8 months for other ‘BBB’ rated peers) and low net external debt of (4.4% of GDP compared to median of 9.2% for other ‘BBB’ rated peers). This renders a thick cushion in case of regenerated pressures on the rupee and other asset markets
Indian economy is less developed than investment grade peers in many terms
India’s avg per capita income (2013 figures) remains low at USD 1,543 compared with median of USD10,778 for other ‘BBB’ rated peers
UN HDI (Human Development Index) relatively low compared with other ‘BBB’ rated peers
Owing to rising NPAs (4.2% of total assets in September 2013), the Profitability and capital position of the banking sector will likely continue under pressure, particularly for PSBS (Public Sector Banks)

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