Hong Kong: Changes to diesel prices in India do not need parliamentary support and are viewed as an executive decision because oil companies are owned by the government, Finance Minister P Chidambaram said on Tuesday. Chidambaram made the comments at a media briefing after meeting investors in Hong Kong in a drive to try and boost capital flows into Asia's third-largest economy.
The minister also said there was no case whatsoever for any credit rating agencies to downgrade India, as the government scrambles to avoid such a blow to financial markets and investor confidence. India allowed state fuel retailers to raise prices last week to gradually align them with market rates.
The plan aims to prop up public finances without triggering a popular backlash ahead of 2014 elections as the government struggles to rein in fuel subsidies and hold down its fiscal deficit. Fitch Ratings earlier this month reiterated its "negative" outlook on India's sovereign credit rating, citing concerns about slowing economic growth, persistent inflationary pressures and an uncertain fiscal outlook.
The comments from Fitch sovereign analyst Art Woo sent the rupee lower, reinforcing worries that India is still at risk of losing its investment-grade rating from the credit agency. Although Woo described India's fiscal and economic reforms last year as a "step in the right direction," he also expressed concern that the government would miss its fiscal deficit target for the year, while saying the structural reform process was "sluggish."
Fitch and Standard and Poor's, in 2012, cut their ratings outlooks for India to "negative", putting India in danger of being the first of the BRICS grouping of fast-growing economies to be downgraded to "junk" status.