Fitch Current Affairs - 2019
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Fitch Ratings in its Global Economic Outlook has revised up India’s growth forecast for current fiscal year (2018-19) to 7.8% from 7.4% projected earlier. However it has flagged tightening of financial conditions, weak bank balance sheets and rising oil bill as headwinds to growth.
Growth Projections: Fitch’s upward revision in growth forecast comes in backdrop of GDP expanding 8.2% in the April-June period, higher than its expectation of 7.7%. This robust performance was partly attributable to a powerful base effect, with GDP growth dampened in 2Q17 (April-June) by companies de-stocking ahead of rollout of goods and services tax (GST). It has however cut growth forecasts for FY 2019-2020 and FY 2020-2021 growth by 0.2 percentage points to 7.3%.
Inflation Forecast: It is also picking up to upper part of Reserve Bank of India’s (RBI) target band (4%, plus-minus 2%) within forecast horizon on relatively high demand-pull pressures and rupee depreciation.
Rupee: It has been worst-performing major Asian currency so far this year. Despite RBI’s greater tolerance for currency depreciation, interest rates have been raised to higher levels, more than anticipated.
Fiscal policy: It should remain quite supportive of growth in run-up to elections likely to be held in early 2019. The investment to GDP ratio has stopped trending down, helped by ramped-up public infrastructure outlays, in particular by state-owned enterprises (SOEs).
It is one of Big Three credit rating agencies in the world, the other two being Moody’s and Standard & Poor’s. Fitch Ratings is smallest of the “big three”. It is headquartered in New York (US) and completely owned by Hearst Corporation.
Credit rating agency is company that assigns credit ratings, which rate debtor’s ability to pay back debt by making timely interest payments and likelihood of default.
Global credit rating agency Fitch has kept India’s sovereign rating unchanged at ‘BBB-‘ with stable outlook. This rating is at junk bond or lowest investment grade with stable outlook. A rating upgrade changes profile of country and makes it attractive to investors. In 2017, Moody’s had upgraded India’s rating (to Baa2 from Baa3) after gap of nearly 14 years, while Standard & Poor’s (S&P) retained its BBB- rating with stable outlook.
According to Fitch, BBB- rating balances India’s medium-term growth outlook and favourable external balances with weak fiscal finances and some lagging structural factors, including governance standards and still-difficult but improving business environment.
The stable outlook reflects balancing of upside and downside risks to ratings. The main factors that, individually or collectively, upgrade India’s rating action are reduction in general government debt over medium term to level closer to that of rated peers, higher sustained investment and growth rates, without creation of macro imbalances, such as from successful structural reform implementation.
What is Sovereign Credit rating?
Sovereign Credit Rating
A sovereign credit rating is credit rating of country or sovereign entity. It gives investors insight into level of risk associated with investing in particular country, including its political risk. At request of country, credit rating agency evaluates country’s economic and political environment to determine representative credit rating. Obtaining good sovereign credit rating is usually essential for developing countries in order to access funding in international bond markets. Fitch Ratings, Moody’s Investors Service and Standard & Poor’s (S&P) are big three international credit rating agencies controlling approximately 95% of global ratings business