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Monday, February 22, 2010

Moody’s May Raise India Rating on Deficit-Cut Steps

India’s credit rating may be raised from junk if Finance Minister Pranab Mukherjee provides a comprehensive plan to roll back fiscal stimulus and cut the budget deficit this week, Moody’s Investors Service said.

“If we think the exit path is well articulated and well executed, the local currency rating could be upgraded,” Aninda Mitra, a Singapore-based sovereign analyst at Moody’s, said in a telephone interview on Feb. 19. India’s long-term local currency debt is placed at Ba2 by Moody’s, two levels below the investment grade and at par with Armenia and Turkey.

Mukherjee has an opportunity to narrow the budget shortfall as accelerating economic growth boosts tax revenue and a stronger political mandate after last year’s elections paves the way to resume asset sales. Rating changes have less impact on India than other countries like Greece, which borrow more from abroad. India’s foreign borrowings make up only about 4 percent of government debt compared with 83 percent for Greece, according to Citigroup Inc.

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