S&P:Modi to shy from reforms initially,to disappoint optimists

Posted By: Staff
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Mumbai, Oct 16 (PTI) International rating agency Standard & Poor's, which recently upgraded its outlook on the sovereign ratings, said today that the economic performance of the country could "disappoint optimists" through 2015, but will better over a longer-term as the government initiates bold reforms.

"We believe that the country's economic performance will disappoint optimists through 2015 but will likely be better than the fears of pessimists over the long-term," Standard & Poor's credit analyst Joydeep Mukherji said in a report today. In the commentary, which comes a day after exit polls predicted gains for the BJP in the Haryana and Maharashtra polls, Mukherji said Prime Minister Modi will not take any dramatic reform measures immediately but will wait to add as many states in the kitty first before ushering in reforms.

"Modi will seek to win as many state elections as possible, especially in the next two years, to gain seats in the Upper House and ease the passage of legislations," he said. The report indicated that price rise will continue being a problem and that inflation, which is restricting the Reserve Bank from loosening its elevated policy rates, will be at around 8 per cent for 2014 and cool down to 7 per cent in 2015. On the fiscal deficit front, which was one of the top concerns which led S&P to lower its outlook on the country's rating to near junk status at BBB- and threaten a downgrade to junk status in 2012, the agency projected the fiscal deficit to exceed 7 per cent of GDP in FY15 and remain above 6 per cent in FY16.


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