FINANCE MINISTRY’S STATEMENT REGARDING S&P RATING

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The following is a statement issued by the Ministry of Finance in response to recent ratings on India by Standard and Poor’s Rating Service.

"Attention of the Government has been drawn towards the recent ratings on India by the Standard and Poor’s Rating Service.

Government would like to state some facts on the macro-economic indicators, which are as follows:

1. In so far as debt to GDP ratio is concerned, it has been stable during the last 3-4 years. It may also be mentioned that weighted average cost of market borrowings in the first half of current year is 7.52% as against 9.44% during last year. Such reduction in the cost of borrowings will have salutary impact on the interest burden in medium and long term. It is significant that this reduction in the cost of borrowings over the last 3 years has been achieved along with the elongation in the maturity profile of the loans.
2. The industrial and export performance during the period April – July has been higher during 2002-2003 compared to the corresponding period of 2001-2002. The index of industrial production increased at the rate of 4.7% compared to 2.7%. Infrastructural growth has also increased by 6.6% compared to 1.1%. Similarly exports have increased by 15.2% compared to (–) 0.7%.
3. Inflation rate as on August 31, 2002, on a point-to-point basis, has declined to 3.5% compared to 4.9% during the corresponding period of last year.

4. The deficiency of rainfall as of 11^th September, 2002 was restricted to only 16 meteorological regions as compared to 25 meteorological regions at the end of July 2002. It is felt that the assumptions for growth prospects are those reflected in the Government budget.
5. The gross tax receipts including both direct taxes and indirect taxes have increased by 17.73% during April to July, 2002-2003 compared to (-) 11.0% during 2001-2002.
6. The improved fiscal performance during the current financial year is also reflected in lower recourse to borrowing and other liabilities as component of capital receipts. The Government is confident of achieving fiscal targets specified in the budget for the year 2002-2003. This would help achieve moderation in the growth of internal debt in the country.
7. The forex reserves have increased allowing the Government to allow full prepayment of costlier debt.

In view of the above, the Government is confident of the robustness of the economy and the ratings would not affect economy or Government of India’s resource mobilization."