No case for India’s ratings downgrade, insists Mayaram

The government on Wednesday expectedly played down the warning from ratings agency Standard & Poor's that it could be facing a downgrade, with economic affairs secretary Arvind Mayaram saying there was no case for one.

Mayaram insisted that the government would meet its commitment to rein in both fiscal and current account deficits for the fiscal year ending 31 March.

Speaking to the media on the eve of the G-20 summit in St Petersburg, Russia, Mayaram said, ''The finance minister has committed to containing the fiscal deficit at 4.8 per cent of GDP and the current account deficit at 3.7 per cent of GDP and this (target) will be met.''

Mayaram said the government might even surprise the country with ''a less than 3.7 per cent current account deficit''. He added that growth would pick up in the third and fourth quarters of the year with the impact of the $30-billion worth of projects, cleared by the cabinet committee on investments, kicking in.

''GDP growth in the first quarter of FY14 was 4.4 per cent because the fiscal deficit was tightened by 120 basis points last year,'' he said.

On Tuesday, S&P had said the chances of India being downgraded were more than one in three. Currently, India is rated BBB- and any downgrade would reduce the country's rating to junk status.

On the sharp depreciation of the rupee, which has been among the worst performing currencies globally in recent months, the economic affairs secretary said the currency had been hit because of the high current account deficit.

''The perception of a high CAD is contributing to the weakness in the currency,' he siad.

Mayaram hoped the G-20 summit would see a consensus evolve on infrastructure funding, a subject on which there had been some disagreement. ''The World Bank had been mandated to prepare a working paper and a draft may be presented at the summit,'' he said.
 
Dismissing a view that emerging nations such as India might suffer from the new rules being framed to curb tax evasion by large multinational corporations, Mayaram observed there was ''no question of going after anyone''.

He observed that the sole objective of the OECD's recommendations on Base Erosion and Price Shifting (BEPS) was to ensure that companies paid the statutory taxes so that the concerned countries did not lose out on tax revenues.

Much like other emerging economies, India, too, would be looking for some predictability on the US Federal Reserve's move to taper its bond purchases or QE3, Mayaram observed, adding that there could be spill-over effects of such a withdrawal and that this needed to be calibrated.

''There should be a strong statement on the concerns of a spill-over and the determination to work towards minimising its effect,'' the secretary said.

Mayaram also hoped that India's concerns on the roll-back of trade agreements by some emerging nations would be addressed, with these countries standing by the agreements.