Fitch maintains stable outlook on India despite signs of crisis
Despite financial turmoil in India, ratings agency Fitch has maintained its stable outlook on the country's BBB- rating (release).
We expect fiscal policy restraint to persist, in line with last year's result, with the budget deficit remaining within 5% of GDP. Indonesia's policy rates have been raised by 75bp since May, and the fiscal deficit is likely to remain around 2% of GDP.
Fitch believes a central factor will be the strength of official commitment to managing demand so as to deliver sustainable growth without an intensification of vulnerabilities – such as fiscal deficits, inflation and/or external imbalances.
Lastly, structural reforms which may be politically difficult to achieve – such as fuel subsidy reforms.
In recent days India's rupee has hit historic lows against both the pound and the dollar, with suggestion that the central bank will have to tighten monetary policy.
Citi has also cut its forecast for the Sensex index, to 18,900 from 20,800.