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On Wednesday, the Standard & Poor's (S&P) cut its outlook on India's BBB- rating to negative from stable and warned it had a one-in-three chance of losing investment-grade status, sending shockwaves across the ministry. But R Gopalan, Economic affairs secretary told CNBC-TV18 in an interview that had not expected S&P to downgrade the outlook for India, but retain its stable credit rating.
Gopalan said that India's lower external debt service ratio, financial market development, higher resilience in government finances, better capacity for innovation and business sophistication, better quality of India's public institution–proved that India was in a much better position that other countries. "So what we feel is, the S&P downgrade was not fair," he said.
He also mentioned that India's gross domestic product (GDP), which was at 8.2 percent in 2003-2011 was higher than most other countries.While India's growth volatility was at 1.6 percent, other peers were at 2-6 percent in the same period. India's government external debt to GDP was 4.9 percent while the 'BBB' median was 34 percent.
On policy reforms:
Gopalan said that reforms are absolute necessity and they are happening "one by one".
He said that the government is determined to bring about reforms, but all policies need time to be implemented. "I think we are on the path forward as far as the reforms are concerned"
He also said that the government should contain the fiscal deficit below 5.1 percent level. He said that the government needs to act very fast to curb the subsidy levels. "We need to take the diesel deregulation forward," he told CNBC-TV18.
However, he was unable to give a timeframe on the oil reform prices.
On General Anti-Avoidance Rule (GAAR)
According to Gopalan , GAAR has to be investor friendly and transparent, but not arbitrary. "GAAR will vest onus of proof on tax department and not the taxpayer," he emphasized. He said that GAAR is being practiced in a number of countries, so it won't be something very different and new. However, he said that the government will ensure that there is no uncertainty in the process.
"I hope that that message goes loud and clear, GAAR is not retrospective, it is only prospective." Gopalan believes making GAAR 'friendly' and 'predictable' will ensure that all doubts are erased as and when it is presented.
Gopalan expects FY13 to see the highest foreign direct investments into the country.
Why R Golpalan feels S&P downgrade was unfair | Firstpost
Gopalan said that India's lower external debt service ratio, financial market development, higher resilience in government finances, better capacity for innovation and business sophistication, better quality of India's public institution–proved that India was in a much better position that other countries. "So what we feel is, the S&P downgrade was not fair," he said.
He also mentioned that India's gross domestic product (GDP), which was at 8.2 percent in 2003-2011 was higher than most other countries.While India's growth volatility was at 1.6 percent, other peers were at 2-6 percent in the same period. India's government external debt to GDP was 4.9 percent while the 'BBB' median was 34 percent.
On policy reforms:
Gopalan said that reforms are absolute necessity and they are happening "one by one".
He said that the government is determined to bring about reforms, but all policies need time to be implemented. "I think we are on the path forward as far as the reforms are concerned"
He also said that the government should contain the fiscal deficit below 5.1 percent level. He said that the government needs to act very fast to curb the subsidy levels. "We need to take the diesel deregulation forward," he told CNBC-TV18.
However, he was unable to give a timeframe on the oil reform prices.
On General Anti-Avoidance Rule (GAAR)
According to Gopalan , GAAR has to be investor friendly and transparent, but not arbitrary. "GAAR will vest onus of proof on tax department and not the taxpayer," he emphasized. He said that GAAR is being practiced in a number of countries, so it won't be something very different and new. However, he said that the government will ensure that there is no uncertainty in the process.
"I hope that that message goes loud and clear, GAAR is not retrospective, it is only prospective." Gopalan believes making GAAR 'friendly' and 'predictable' will ensure that all doubts are erased as and when it is presented.
Gopalan expects FY13 to see the highest foreign direct investments into the country.
Why R Golpalan feels S&P downgrade was unfair | Firstpost
