NEW DELHI: India today coaxed Fitch to upgrade its sovereign rating, unchanged for almost 12 years, saying that structural reforms and stabilisation of the new GST regime have helped the country recapture the fastest growing economy tag and the government will stick to its revised targets for lowering Budget deficit.
India wants Fitch Ratings to take follow rival Moodys Investors Service, which in November gave the country its first sovereign rating upgrade since 2004.
Fitch had last upgraded India's sovereign rating from BB+ to BBB- with stable outlook on August 1, 2006 and is due for an annual review in a couple of months.
Top finance ministry officials led by Economic Affairs Secretary Subhas Chandra Garg, Chief Economic Advisor Arvind Subramanian and Principal Economic Advisor Sanjeev Sanyal laid bare the government's reforms roadmap when Fitch Director, Sovereign Ratings, Thomas Rookmaaker and other officials met them here, sources said.
They are understood to have explained that the slippage in fiscal or budget deficit target for the current fiscal was a mere arithmetic slippage caused mostly due to just 11-months of Goods and Services Tax (GST) revenues accruing to the government instead of full 12 months.
In the Budget for 2018-19 presented on February 1, Finance Minister Arun Jaitley revised the fiscal deficit target for current fiscal year ending on March 31 to 3.
5 per cent of GDP from 3.
2 per cent previous target.
For the next fiscal (2018-19), he projected a fiscal deficit of 3.
3 per cent of GDP as opposed to 3 per cent previously announced.
During the discussions, the government is understood to have said that it will follow the fiscal consolidation roadmap and will lower the fiscal deficit to 3 per cent of GDP by 2020-21.
Sources said the finance ministry told Fitch officials that it is "following the path of fiscal prudence and contained fiscal deficit at 3.
5 per cent of GDP this year despite getting 11-month revenue under GST".
They said the ministry officials also informed Fitch that they "can't take chance with fiscal prudence because that affects inflation.
Hence we should go by fiscal discipline".
The government will introduce amendments to the FRBM Act in the ongoing Budget Session of Parliament, specifying the consolidation roadmap.
As per this roadmap, the fiscal deficit will be lowered to 3.
3 per cent in the next fiscal starting April 1, to 3.
1 per cent in 2019-20 and 3 per cent by 2020-21.
The international rating agency also raised queries on GST and the recent fraud at Punjab National Bank.
Sources said the ministry told Fitch that GST has more or less stabilised and after e-way bill and invoice matching starts, there will be a pick up in revenue collection in next 7-8 months.
On the Rs 12,700 crore fraud at Punjab National Bank, the ministry said that investigation is on and action would be taken in the case once the probe is over.
Last month, PNB said two of its employees had fraudulently issued guarantees and transmitted SWIFT instructions to the overseas branches of Indian banks to raise buyer's credit for companies of fugitive jewellers Nirav Modi and his uncle Mehul Choksi without making entries in the bank system.
With regard to privatisation of public sector banks (PSBs), the ministry said that it was not on "immediate agenda".
The call for privatisation gathered currency as the country's biggest bank fraud unravelled.
Showcasing strong macro economic fundamentals and uptick in economic activity, the finance ministry official said the GST has led to increased tax payer base.
The Indian economy grew by 7.
2 per cent in the October-December period, fastest in five quarters, and surpassing China for the first time in a year.
China grew by 6.
8 per cent in the same period.
The ministry officials also told Fitch that the government is selling off loss making public sector companies or PSUs and in current fiscal disinvestment proceeds have touched Rs 1 lakh crore.
In May last year, Fitch kept India's sovereign rating unchanged at 'BBB-', the lowest investment grade, with stable outlook.
The rating was assigned to the country more than 11 years ago.
Fitch had last upgraded the rating from 'BB+' to 'BBB-' with stable outlook on August 1, 2006.
Later, it changed the outlook to negative in 2012 and then again to stable in the following year, though it kept the rating unchanged at the lowest investment grade.
The Fitch review for annual sovereign rating follows India's rating upgrade by Moody's after a gap of 14 years, while S&P retained its rating for the country.
While Moody's had in November 2017 raised India's sovereign rating from the lowest investment grade of 'Baa3' to 'Baa2' -- the first upgrade in almost 14 years, and changed the outlook from stable to positive, S&P refrained from upgrading the rating from 'BBB-' citing high government debt and low income levels.
S&P has maintained 'BBB-' rating on India since 2007.
After the Budget for 2018-19, presented in Parliament on February 1, Fitch Ratings had said that high debt burden of the government constrains India's rating upgrade.
India's debt:GDP ratio currently stands at around 69 per cent.