The ratings agency clearly indicated fiscal deficit and debt burden as triggers behind their move and there is some skepticism over efforts to cut the current account deficit.
India’s widening fiscal deficit is what economists have been debating for the last several months now. Add to that growing inflation, falling rupee, ballooning current account deficit, massive debt and no foreign investment. A downgrade from rating agency S&P was bound to happen.
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And this is exactly what Standard Chartered has said too.The ratings agency clearly indicated fiscal deficit and debt burden as triggers behind their move and there is some skepticism over efforts to cut the current account deficit, said Sarah Hewin in an interview with CNBC-TV18. However, she feels that though its initial impact on the rupee was muted, in the coming days it will hurt the portfolio flows.
“The situation wasn’t particularly surprising, but in terms of what we can expect for rates, we think that the outlook downgrade will dampen the interest in local currency debt, which has already weakened on other related uncertainties,” she added.
Watch the full interview above.
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