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Outlook on India 'BB' FC Rating Revised to Positive From Stable

Standard & Poor's Ratings Services on 23rd august 2004, revised its outlook on India's 'BB' long-term foreign currency rating to positive from stable. The outlook on the 'BB+' long-term local currency rating was revised to stable from negative. At the same time, all the ratings on India (foreign currency BB/Positive/B, local currency BB+/Stable/B) were affirmed.

The outlook revisions reflect India's improving external liquidity and better prospects for the government's debt burden to stabilize. In addition, India's robust foreign exchange reserves, which exceed 2000% of short-term debt, mitigate the risk of volatility in external confidence.

Standard & Poor's also revised its outlook on the Export-Import Bank of India's 'BB' long-term foreign currency rating to positive from stable, while the outlook on the 'BB+' long-term local currency rating was revised to stable from negative.

The sovereign ratings on India are supported by the country's good economic prospects, with GDP growth likely to trend over 6% over the medium term. The service sector is dynamic, while the industrial sector is benefiting from gradual deregulation, trade liberalization, and modest improvements in infrastructure.

Good economic growth could contain the pressure on India's already weak public finances, provided tax reform continues.

India's external debt and debt service burden is expected to fall due to strong export growth and non-debt foreign capital inflows, which should help offset the impact of rising imports given the surge in oil prices. India's total external debt is likely to fall below 100% of current account receipts for the current fiscal year ending March 31, 2005, compared with over 200% in fiscal 1993.

Nevertheless, the sovereign ratings on India remain constrained by high public debt and serious fiscal inflexibility. "The country's fiscal weakness is the worst among rated sovereigns, leaving it particularly vulnerable to economic cycles and any decline in growth rates," according to S&P.

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Moody's Ratings of Indian Banks and Financial Institutions (February 2004)...Click Here

Detailed comments of Moody's upgrade of India's long term foreign currency rating (February 2004) ...Click Here

Detailed comments of Standard & Poor's Upgrade of India's Outlook (December 2003)...Click Here

Detailed comments of Standard & Poor's Ratings of major Indian financial institutions/commercial Banks (October 2003) ...Click Here

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