Fitch sees no impact of Rajan exit, says policies more important

Mumbai, June 20 (IANS) As India seeks an upgrade of its credit risk profile by Fitch, the global ratings agency doesn't see much of an impact on the country's larger policy profile following the exit of Reserve Bank of India Governor Raghuram Rajan and said the successor, though, will inherit a "solid" base.

"From a rating perspective, policies are more important than personalities. In the past years, significant policy changes have been set in motion in India not in the least by Governor Rajan," said Thomas Rookmaaker, Director in Fitch's Asia-Pacific Sovereigns Group.

"Problems associated with both high inflation and weak bank balance sheets have been recognised, and policy makers are doing something about it -- including through the set-up of new policy frameworks," Rookmaaker said in a statement.

This, he said, implied support for such policies beyond the governor in the RBI and government.

"The next governor seems to inherit a solid basis in this regard, providing him or her with good opportunity to continue to pursue relatively low consumer price inflation and strengthened bank balance sheets."

This observation comes not just a couple of days after Rajan formally said he was not interested in a second term as the RBI governor but also a fortnight since Fitch was approached by the Ministry of Finance for a sovereign ratings upgrade.

"We highlighted the overall economic situation in all the major sectors the challenges which the economy faces and what is the outlook for the next year," Economic Affairs Secretary Shaktikanta Das had told reporters here the meeting with Fitch representatives.

Rookmaaker, who was part of the team from the ratings institution, had remarked: "We are now in the process of our review. It is going to take some time."

In December last year, Fitch retained India's sovereign rating at the lowest investment grade of "BBB-/stable" -- just a level above junk grade -- but said the country would continue to post good growth despite subdued prospect for the Asia Pacific region.

The positives which Fitch finds in India are a stable outlook, strong medium-term growth prospect and favourable external finances, but felt these were balanced out by high government debt, weak structurals and a difficult but improving business environment.