Here is what Fitch the international rating agency thinks of India. It said,
The Negative Outlook on the Local?Currency IDR reflects the agency’s judgement that the fiscal deterioration in the year to end?March 2009 (FY09) and FY10 has been partly structural in nature, and that India’s public finances are set to stress comparisons with ‘BBB’ peers beyond breaking point. The agency looks for meaningful fiscal consolidation measures to get India’s public finances onto a path consistent with the current ratings.
Fitch estimates India’s general government budget deficit at 11.6% in FY09, declining only marginally to 10.7% in FY10, reflecting stimulus through indirect tax rate cuts and surging expenditure, primarily on subsidies and wages.
What Could Trigger A Downgrade of India ?
Failure to establish a credible new strategy for fiscal consolidation based on meaningful and realistic structural policy changes, needed to bring India’s public finances nearer ‘BBB’ standards
A sustained interruption to the Indian sovereign’s so?far robust capacity to fund itself would strongly increase negative pressure on the ratings.
[ We don’t rely on these ratings and change investment strategy, however in short to medium term they determine the FII and FDI flow into India.]