DBRS Upgrades India Outlook

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Jul. 13 – The Canadian credit rating company Dominion Bond Rating Services (DBRS) has upgraded the inclination of India’s Long Term foreign and local currency debt ratings for the first time from BBB Negative to a stable outlook. DBRS has been rating India since June 2007 and, according to the agency, the Indian government’s efforts to reduce the fiscal deficit for 2011-12 are very appreciable.

“Government is addressing the country’s infrastructure deficit by spending US$514 billion, or 9 percent of GDP, on infrastructure between 2007-2012, and an additional US$1 trillion from 2013-2017, approximately one-half of which may come from the private sector and public-private partnerships,” DBRS stated.

DBRS also highlighted the option of the new direct tax code (DTC) contributing to improved tax efficiency and the national identification card increasing labor market formality, raising tax compliance and reorganizing subsidies and social security expenditures.

DBRS also appreciated India’s response towards global economic problems. The agency recognized India’s medium-term fiscal policy and commitment to debt reduction. Fitch Ratings, another global rating agency, also appreciated India’s stand on the current account deficit.

India’s sovereign debt is rated by six international sovereign credit rating agencies (SCRAs) namely Standard and Poor’s, Moody’s Investor Services, DBRS, Fitch Ratings, Japanese Credit Rating Agency, and Rating and Investment Information. These agencies normally visit Ministry of Finance and Reserve Bank of India before making their assessment. The Government on its part has begun a structured interaction process with SCRAs.

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