Fitch Cuts Outlook on India's Debt on Budget Concerns

By [bn:PRSN=1] Kartik Goyal []

July 15 (Bloomberg) -- India's credit outlook was cut to negative from stable by Fitch Ratings, which said rising subsidies, interest payments and wages may weaken the government's finances.

Fitch affirmed its BBB- rating on India's long-term local- currency debt, the lowest investment grade, six notches below China and Japan and one level below Egypt, Morocco and Namibia. The ratings company also kept its ranking on the nation's foreign-currency debt at BBB- with a stable outlook, according to a statement today.

``The revision to the local currency outlook is based on a considerable deterioration in the central government's fiscal position, combined with a notable increase in government debt issuance to finance subsidies not captured in the budget,'' said James McCormack, Fitch's head of Asia sovereign ratings.

The government's budget deficit in the current fiscal year may widen to 4.5 percent of gross domestic product from 2.8 percent in the previous 12 months due to higher interest costs and salaries and rising subsidies, the ratings company said.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.