Fitch Confirms India Stable Outlook

Fitch Ratings reaffirmed India's stable credit rating outlook on a higher five-year GDP growth of 6.7%, up from 3.2% previously determined.
The key threats to the rating are deviations from fiscal consolidation, a prolonged period of slow growth, and macro policy miscalculations that trigger inflationary pressures and deterioration in banking assets, which may require higher government support.

Fitch expects India's economy to expand 5.5% in the current fiscal year and 6% in 2015-16, but adds that "the course of the Indian economy, including the steel industry, remains uncertain" due to political instability ...

Fitch says that once the next coalition begins implementing its economic policies, it will become clearer whether the economy can return to a higher path of sustained growth or remain at current levels. A political push that includes structural and governance reforms should curb inflationary pressures and is likely to require a coalition with a strong electoral mandate.

India's inflation is still high. However, a gradual inflow of investments is expected after the elections are over and the uncertainty dissipates. The implementation of about 300 projects of the Government Investment Committee will contribute to their growth. Some of these projects may not be viable or may face difficulties at the state level.

Fitch believes the budget deficit target will be 4.8% of GDP in 2014, despite the pending elections.