Expressing concern over slowdown in the pace of reforms, Standard & Poor's has said India's rating could come under stress if Government fails to pursue reforms agenda and overshoots fiscal deficit target.
It ruled out a rating upgrade for the country in the next 12-18 months but said that in case the Government is able to get the Goods and Services Tax (GST) bill passed in the forthcoming Winter Session of Parliament, it would be a credit positive.
“GST will bring in a simple tax regime and a business friendly environment. Passage of GST bill will be credit positive for India. It would indicate that Government’s reform initiative is picking pace with a strong momentum,” S&P’s Rating Services India Sovereign Analyst Kyran Curry told PTI.
Reforms like land acquisition bill and GST have been stuck due to political logjam in Parliament.
“In our analysis, in past six months, the progress of reform has slowed down,” Curry said while ruling out a rating upgrade over the next 12-18 months.
US-based S&P has assigned ‘BBB-’ rating on India with a stable outlook. ‘BBB’ is the lowest investment grade rating.The global credit rating agency would formally review India’s ratings in November 2016, but would keep a close watch on the upcoming Budget to see how the Government plans to maintain the deficit target and go ahead with the reforms, Curry said.
“The ratings could come under stress if we see that Government is backing away from reform commitment and fiscal deficit is not in control,” Curry said.
Although Government plans to roll out GST, billed as the most comprehensive indirect tax reform since Independence, from April 1, 2016, the date looks difficult as the Constitution Amendment Bill is stuck in the Rajya Sabha where the ruling NDA does not have a majority.