Budget leaves rating negatives open: S&P

Standard & Poor's Ratings Services maintains its view that India's high fiscal deficits are not sustainable in the medium term and if fiscal consolidation is delayed, there is a risk that the sovereign credit ratings on India (BBB-/Negative/A-3) may be lowered. Although the central government budget deficit of 6.8% of GDP for fiscal 2009-10 was high at almost double the 2.7% recorded in fiscal 2007-08, it was within S&P expectations. Including state government deficits and off-balance-sheet items such as oil and fertilizer bonds, the deficit is estimated to reach about 12% of GDP in fiscal 2009-10. S&P revised the outlook on India to negative on Feb. 24, 2009, on expectations of increasing fiscal deficits. It continues to believe that such high levels of deficits are unsustainable in the medium term, although it was not surprised by the number itself. If India achieves fiscal consolidation in the next two to three years, the sovereign ratings on India could be maintained at 'BBB-' and the outlook revised to stable, S&P said.