Thursday, May 19 2005 16:30 Hrs (IST) - World Time -

Mumbai: Rating agency Fitch today (May 19, 2005) affirmed India's foreign and local currency ratings at 'BB+' with a stable rating outlook but said the high fiscal deficit prevented the country from achieving an investment-grade rating in the near term.

"Despite India's external strengths such as solid external liquidity and a declining external debt burden, its high fiscal deficit prevents the country from achieving an investment-grade rating in the near term," Fitch said in a release in Mumbai. Future ratings would hinge upon the progress made by authorities to improve public finances.

"Swifter deficit reduction would place public debt on a stronger footing and encourage a virtuous cycle of lower interest rates, greater private investment and higher economic growth, all of which will be supportive of higher sovereign rating," senior director of Fitch's Sovereign rating team Shelly Shetty said.

The rating agency said the general Government debt stock of over 80 per cent of GDP is significantly higher than the 'BB' median and a further build-up in public debt would undermine the ability of the Government to respond to shocks.

With rapid build-up in international reserves that reached $ 137 billion at the end of 2004-05, India is estimated to have turned into a net external creditor, it said.