Mumbai: Fitch Ratings on February 11 affirmed India's long-term foreign currency and local currency ratings at "BB" and "BB+" respectively with a stable rating outlook.

The short-term foreign currency rating was at "B".

The affirmation and outlook, balances sharp improvement in external accounts during the past two years with an ongoing deterioration in health of public finances that shows little sign of being addressed in the near future, Fitch said in release from London on February 11.

Moody's had last week upgraded India's country ceiling for foreign currency debt and bank deposits following an improvement in the external liquidity position.

Fitch said the divergent trends between fiscal and external accounts have been accentuated within the past year.

India's liquidity position has strengthened with reserves (excluding gold) rising by $ 18 billion between March 2002 and January 2003. However, growing prospects of war could expose India's dependence on oil imports and overseas workers remittances from Middle East, it cautioned.

Fitch warned that continued back peddling on economic reforms and fiscal profligacy resulting in sub-optimal growth and rising government debt could lead to a downward adjustment of the local currency rating. Moreover, unless the government begins to address fiscal problems soon, external improvements could weigh increasingly lightly in the rating balance.

The affirmation of sovereign ratings recognises that the government still has room to manoeuvre - a large domestic capital market allows it to finance most of its deficit domestically.

PTI